Economics 2150A/B Lecture Notes - Demand Curve, Opportunity Cost, Discount Window

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coralporpoise546

19 Apr 2014

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ECON 2150A/B Full Course Notes

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P a g e | 1: short-run cost minimization. Firm chooses l (the variable input) to minl tc= wl + r. The fc is just a constant so it drops out when we are trying to find the optimal l (by taking first derivative of and setting=0) to use in the sr. Graphically, we can see that keeping k fixed in the sr means that the firm will operate at higher. Tc than minimum cost if it tries to expand output. The firm above could operate at c, lower tc, in the lr. However, in the sr, it is stuck at e (or. B in graph below), which has higher tc, because it cannot expand its capital from k=k1 in the. In the lr, the firm lowers its total costs by using more k and less l. A only output level where lr cost-minimizing bundle is same as sr cost-min bundle.

Related Questions

A price taking firm chooses its inputs to maximize short-run profits. Its Cobb-Douglass production function has the following form: q(L, K) = L ^(1/2)K^(1/3) . The output price is 1,000 per unit and the cost of each unit of input is 10. In the short-run, capital is fixed at 27 units.

(a) Set up the profit function in terms of labor only.

(b) Find the optimal choice of labor, L* .

goldwildebeest627

A firm manufactures widgets according to the production function Q = 8L3/4 K1/4, where Q is the number of skis made, K is the amount of capital, and L is the amount of labor employed. The firm is currently producing Q = 120 using L = 15 and K = 15. The factor price of Labor (w) is $10 and the factor price of Capital (r) is $2. The firm suspects that it is not minimizing the cost of producing Q = 120 and has hired you, a student taking a course with the most famous economist in campus, to help it understand the nature of its inefficiency. a) At the current level of production (Q = 120) what are the marginal productivities of Labor and Capital respectively? MPL = Answer MPK = Answer b) What are the current cost of production for the company? TC = $Answer c) In order to minimize the costs of production the company should use more Answer d) In order to miminize costs of production the company should use the following input ration: K = Answer L e) Say the company wanted to continue use the same total costs as to when K and L = 15, and instead produce more output. How much output can the company produce? Q2 = ?

purplemosquito873

A price taking firm chooses its inputs to maximize short-run profits. Its Cobb-Douglass production function has the following form: q(L, K) = L^(1/2) K ^(1/3) . The output price is 1,000 per unit and the cost of each unit of input is 10. In the short-run, capital is fixed at 27 units.

(a) Set up the profit function in terms of labor only.

(b) Find the optimal choice of labor, L â .

Another price taking firm chooses its inputs to maximize long-run profits. Labor and capital are substitutes in production and both exhibit decreasing returns to scale, q(L, K) = L^(1/2) + K^(1/2) . The output price is 100 and the price of each of the inputs is 10.

(a) Set up the firmâs profit function and provide the two conditions for profit maximization.

(b) Find the profit maximizing levels of capital and labor.

rosearmadillo753

Economics 2150A/B Lecture Notes - Demand Curve, Opportunity Cost, Discount Window

ECON 2150A/B Full Course Notes

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