ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP_PP

# Eco 204 s ajaz hussain do not distribute case b this

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Unformatted text preview: his version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. Case B This requires that with the FOC: and Substitute and . Start : Thus, for . This requires to check the conditions under which we need: () That is, if price falls below ABC should not serve any passengers: One can also re-state this as: Intuitively, case B says that if the wages are too high, ABC should not serve any passengers. Case C This requires that with the FOC: Substitute and . This requires to check the conditions under which and . Start : 62 ECO 204 Chapter 12: Practice Problems &amp; 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. Thus, for we need: () That is, if price is equal to or above ABC should serve 1,000 passengers. One can also re-state this as: Intuitively, case C says that if the wages are sufficiently low, ABC should serve the maximum capacity. Case D This requires that and requires checking when and Start with the FOC: Substitute () Intuitively, case D says that if when price equals ABC will carry anywhere from zero to 1,000 passengers. This can be re-expressed as: 63 ECO 204 Chapter 12: Practice Problems &amp; 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. Combing all cases, ABC’s supply curve is: () {[ () () Or: {[ (12.14) Assume that Ajax Inc. owns capital that it uses to produce output. The company purchased capital at the purchase price of the capital was ( ) and capital has a lifetime of periods. Denote the opportunity cost rate of return in period by ( ). (a) Suppose this company uses straight line deprecation methods. What is , the depreciation of capital, in each period? State all assumptions and show all calculations. Answer Using straight line depreciation methods and assuming zero salvage value at be: the depreciation in each period will () (b) Derive an expression for ( ), the value of capital in period , in t...
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## This document was uploaded on 01/19/2014.

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