UCLA
Economics 11 – Fall 2009
Professor Mazzocco
Problem Set 7
Because of the midterm this problem set will not be graded and you do not have to turn it
in. However, solving the following exercises is an excellent practice for the midterm.
1)
Suppose that the cost function of q is given by: C = 100 +10q + 5q
2
a)
Find the fixed and variable cost.
b)
Find the average cost and marginal cost
c)
Draw the relationship between MC and AC. Prove that they always intersect at the
minimum. (Hint: compute the derivative of AC with respect to q and set it equal to zero.
Then use this equation to show that MC=AC).
2)
Let the production function be
°
=
?
1/2
?
1/4
assume that both factors are variable.
a)
Derive the total cost function.
b)
Find the amount of K and L necessary to produce q =1000 when v=2 and w=1.
c)
Find the average and marginal cost functions.
3)
Volkswagen has two plants in which it produces its cars: It can either produce cars in
Germany, a highproductivity plant, or in Mexico a lower productivity plant. The
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 Fall '07
 McDevitt
 Economics, rental rate

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