Unformatted text preview: Econ 100A  Worksheet #12 Cost Minimization and The Competitive Supply Function Exercise 1 (Long Run Avoidable Fixed Cost) Consider a firm’s long run production function for a good Q to be produced with capital K and hours of labor L . The production function is the following: F ( K,L ) = if K < 1 ( K 1) 1 3 L 2 3 otherwise. 1) Compute the conditional input demands and the cost function associated with this technology to produce a quantity q > when the user cost of capital is r and the hourly wage is w . 2) Compute the conditional input demands and the cost function associated with this technology to produce a quantity q = 0 when the user cost of capital is r and the hourly wage is w . 3) Does this firm have (sunk) fixed costs as defined in the lecture? 4) Why can we say that this firm has avoidable fixed costs (sometimes referred to as quasifixed costs). Exercise 2 John Locke’s Box Company produces high technology hyperresistant boxes that are sold in bundles of 1000 boxes. The marketJohn Locke’s Box Company produces high technology hyperresistant boxes that are sold in bundles of 1000 boxes....
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This note was uploaded on 07/09/2010 for the course ECON 100A taught by Professor Woroch during the Fall '08 term at Berkeley.
 Fall '08
 Woroch
 Microeconomics

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