Assume the following production function q k 5 l 5

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10. Assume the following production function: Q = K .5 L .5 . Further, assume that in the short-run, capital is fixed at K =16, and that the rental rate r is $1000 per unit of capital and the wage rate w stands at $80 per unit of labor. From this given information, the firm's total fixed cost can be shown to be: Hint: Total Cost : TC = rK + wL a. $8,000 b. $16,000 c. $24,000 d. $12,800 e. none of the above. 11. On the basis of the information given in the previous problem, it can be shown further that the total variable cost is: ( Hint: Think of how L and Q are related to each other ) 12. ABC Corporation serves foods to both a student market and a general public market. The demand in the two market differs: P 1 = 20 - 2 Q 1 for general public P 2 = 15 - Q 2 for student The marginal cost facing the firm is constant at 6. The optimal prices ( P 1 and P 2 , respectively) are: 3
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  • Spring '10
  • Economics, Tina, Cournot

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