MI PS07 solutions - 1 Solution The marginal product of the...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1. Solution: The marginal product of the two inputs are: Given the output level and factor prices and , the conditional demand of the two input factors are determined in following two conditions: We can solve out the solution as And the long run cost function is The marginal cost function is The average cost function is Note the average cost is always half the value of the marginal cost. Given price , the quantity supplied is determined by Or equivalently, This is the supply function. Given , the short run production function is And the short run conditional demand for is
Image of page 1

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

View Full Document Right Arrow Icon
The short run total cost function is The short run total variable cost is $ MC The short run marginal cost is AVC Short run supply curve: , or 25 y Note that the minimum of of the short run average cost curve is 0, attained when , which requires 0 input of . So we know, at price , the firm is indifferent between shut down and producing in the short run. Then the marginal product of labor is 2. Solution: k The iso-quant line for output level is as the red kink line shows. The slope of the line connecting the two intercepts is
Image of page 2
Image of page 3
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