Problem Set 8

Problem Set 8 - K ). a) Write down the cost minimization...

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UCLA Economics 11 – Fall 2010 Professor Mazzocco Problem Set 8 Due by November 30 before 9:00am in the box located outside room 2221E, Bunche Hall 1) Suppose that the cost function of X is given by: C=500-10X+25X 2 a) Find the variable cost (the part that varies with the quantity X). b) Find the fixed cost (the part that does not vary with the quantity X). c) Find the average cost. d) Find the marginal cost e) Draw the relationship between MC and AC. Prove that they always intersect at the minimum AC 2) The production function for doors is given by: 1 Q K L  . The wage is equal to 1 and the price of capital is equal to 5. Consider first the short-run decisions of the firm Microhard (simply fix the level of capital at
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Unformatted text preview: K ). a) Write down the cost minimization problem that Microhard has to solve in the short run. b) Find the contingent demand function for labor and the corresponding short-run total cost function. c) Find the short run-average cost and the short-run marginal cost of labor. Now consider long-run decisions, where we are free to choose the optimal amount of labor and capital. d) Write down the cost minimization problem that Microhard has to solve in the long run. e) Find the contingent demand function for labor and capital and the corresponding total cost function. f) Find the long-run average cost and the long-run marginal cost of both inputs....
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