Problem Set 3
Due: March 31April 1
Intermediate Microeconomics, Spring 2011
Prof.Gemici
Answer the questions below in as much detail as possible.
Make sure you
show all calculations.
You will not be given any credit for just writing
down the answer without showing the derivations and calculations.
The solutions to this problem set are due the beginning of your Recitation
class.
1. A firm’s production function is given by:
Q
=
K
2
L
The wage rate is
w
= 10 and the rental rate of capital is
r
= 20.
Suppose the firm wants to produce 27
,
000 units of output.
(a) What is the most efficient combination of labor and capital (L,K)?
(b) How much does the firm spend?
2. Suppose that a firm’s production function of output Q is a function of
only two inputs, labor (L) and capital (K) and can be written as,
Q
= 25
LK
Let the wage rate for labor be
w
= 5 and the rental rate of capital be
r
= 1. Find the equation for the firm’s longrun total cost curve as a
function of quantity Q.
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 Fall '10
 Gemici
 Microeconomics, Supply And Demand, rental rate, 2L, longrun total cost

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