Unformatted text preview: L (Hint: K * and L * will be functions of q, v and w ) b) Compute the TC function (Hint: TC will be functions of q, v and w ) c) Compute the TC function if w = v = $4. (Hint: TC will now be function only of q ) d) If K is fixed at K 1 , then the production function is: Show that the STC function is : For the remainder of question (4) assume K 1 = 4 and if w = v = $4. e) Calculate the short-run marginal cost . f) Calculate the firm’s short-run variable cost function and the short-run average variable cost function. g) What is the firm’s shut-down price? (Hint: Think about average variable costs) h) Calculate the firm’s short-run average total cost function. i) At what price with the firm break even? j) Will the firm produce in the short run if the price is $0.60? Why or why not? 5) Is the elasticity of SAFC with respect to q larger at high output levels or at low output levels? Dr. Steven Waters Econ 380 Page 1 of 1...
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- Spring '11
- Economics, total cost function, $0.60, Dr. Steven Waters