Problemset-6-2010-1 - Department of Agricultural and...

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Department of Agricultural and Resource Economics University of California, Davis ARE 100A Problem Set VI Winter 2010 Richard Howitt Short Run Supply &Long Run Cost Functions Quiz on February 27 th Given that a firm has a production function: 0.32 0.56 10 QK L = If the cost of capital ( r ) is $20/ unit, and the wage rate of labor ( w ) is $10/unit. (a) Assume that the quantity of capital is fixed in the short run at 24 units. Use the production function to analytically and numerically derive the short run supply function. (b) What is the elasticity of supply at an output of Q = 150 (Expect a high elasticity).
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