Econ100A_PSET7 - Problem Set 7 Profit Maximization and...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Problem Set 7 Profit Maximization and Supply 1. Suppose LTC(Q, w, r)= wrQ 2 a. Find LMC(Q, w,r) b. Find the firm’s supply function Q(P, w, r). c. Let w=2 and r=2 and P=4. What is the firms’ profit maximizing level of production? 2. LMC(Q, w, r) = .5 (wrQ) 1/2 . It currently faces w=4, r=4 and the price of output is P=17. It is currently producing 100 units/week. Should it increase production? Explain intuitively why or why not. 3. Suppose Q=L 1/2 is the firm’s production function. (It uses labor and no capital.) Suppose the wage rate is 4. What is its supply function? 4. If a firm’s long run supply function is given by the formula Q*(P,w,r)= [P/(w+r)] 1/2 , what is the formula for its marginal cost function? 5. Is the condition “Output price is greater than or equal to minimum short run average cost” a necessary condition for a profit-maximizing firm to be willing to produce a positive level of output in the short run? Is it a sufficient condition ? Explain.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern