Unformatted text preview: mutton), characterize its returns to scale, and graph some iso-quants below. Show all calculations below.
(c) Derive the cost function of “surf” plates and from this characterize the returns to scale. Show all calculations. (d) Derive the cost function of “turf” plates and from this characterize the returns to scale. Show all calculations. (e) Suppose
plate is $1.50 ( . Show that the cost of a “surf” plate is $1.50 and the cost of a “turf”
). Please show all calculations. (12.7) Ajax Cola, a soft drinks manufacturer, uses a technology that combines equal amounts of sweetener, labor ( ),
capital ( ), and materials ( ) as complementary inputs to produce soft drinks ( ). Currently, Ajax Cola uses sugar ( ) as
a sweetener. Ajax purchases/hires/leases all inputs as a price taker. Denote the price of sugar by
the wage rate by
rental rate by , and the price of materials by . In this question, assume all inputs are variable. , the capital (a) Write down Ajax Cola’s production function and characterize its returns to scale. Show all calculations below.
(b) Calculate the optimal inputs required to produce target output . Show all calculations below. 1 Surf and Turf refers to seafood and meat dishes. “Surf” is seafood (named for ocean surf) and “turf” is red meat (named for g rass, or turf, upon
which cattle/animals graze).
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. (c) What is Ajax Cola’s cost function? From this calculate the average and marginal cost functions. Show all calculations
(e) What is the elasticity of total cost with respect to sugar prices? Show all calculations below.
(f) Due to greater volatility in sugar prices, Ajax Cola has reconfigured its technology to enable the use of sugar ( )
and/or fructose ( ) as sweeteners, where 2 units of fructose can be perfectl...
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This document was uploaded on 01/19/2014.
- Fall '14