Solutions to Two open Problems from Midterm 2 2009

# Solutions to Two open Problems from Midterm 2 2009 - This...

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

This document contains the solutions to two open problems of Midterm 2, 2009. The problems are listed below, and the solutions are on the following page. Problem 1 (20 Points) Denote by w and r the price of labour (L) and capital (K) respectively. Consider the production function Q =6LK (2/3) . The marginal product of labour and capital are MP L =6K (2/3) and MP K =4L(K) (-1/3) respectively. a. (5 Points) Find the long run input demand function for labour and capital. b. (5 Points) Assume w=3 and r=2. Find the long run total cost function for this firm as a function of the level of output. c. (5 Points) Assume that in the short run the level of capital is fixed to K=27. Find the short run input demand functions for labour and capital. d. (5 Points) Assume that in the short run the level of capital is fixed to K=27. Find the short run total cost function as a function of the wage rate (w) the cost of capital (K) and the level of output. The price of labour is w and the price of capital is r.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern