ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP_PP

Bbb purchaseshiresleases all inputs as a price taker

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Unformatted text preview: labor and seafood as complements in a 1:1 ratio. BBB prepares a target output function: of turf plates by using labor and “meat” as complements according to the production ( ) In turn, “meat” consists of beef ( ) and mutton ( ) combined as “perfect substitutes” where a unit of beef is perfectly substitutable for two units of mutton. BBB purchases/hires/leases all inputs as a price taker. Denote the price of seafood as the labor wage rate by price of beef by , and the price of mutton by . In this question, assume all inputs are variable. , the (a) Write down BBB’s production function for “surf” (seafood) using labor and seafood as complements in a 1:1 ratio, characterize its returns to scale, and graph some iso-quants below. Show all calculations below. Answer Initially RTS: ( ( ) ). If we double all inputs, Now: ( ) ( ) 2 Surf and Turf refers to seafood and meat dishes. “Surf” is seafood (named for ocean surf) and “turf” is red meat (named for grass, or turf, upon which cattle/animals graze). 21 ECO 204 Chapter 12: Practice Problems & Solutions for The Long Run Cost Minimization Problem in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. new So it has constant returns to scale. Drawing the iso-quants: The L-shaped corners are where . S (Seafood) S=L L (Labor) (b) Write down BBB’s production function for “turf” using labor with “meat” as complements according to ( ) characterize its returns to scale, and graph some iso-quants below. Also, write down BBB’s production function for “Meat” using beef and mutton as perfect substitutes (where a unit of beef is perfectly substitutable for two units of mutton), characterize its returns to scale, and graph some iso-quants below. Show all calculations below. Answer “Turf” Note the inputs on the axes below ( “Meat” Please note which input is on the axes below ) Corners will be where | or Also, consta...
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