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Lecture 7

# ECON 310 Lecture 7: l310x7 Premium

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Department
Economics
Course
ECON 310
Professor
E Funkhouser
Semester
Spring

Description
Lecture 7 More Supply Curves A. Profit Maximization with Calculus 2 Example using CobbDouglas Production Function Q = K L.4 .2 The market wage is 2 and the rental rate on capital is 4. a) Graph the longrun average cost and marginal cost curves. b) Graph the shortrun average cost and marginal cost curves for K = 100 and K= 200. (what is the relationship to the longrun curves) c) What is the supply function of this firm? d) How much will the firm supply when the price of output is 50? How much will the firm supply when the price of output is 100? a) Longrun curves At optimum, (.5) KL = .5, or K= L 1.67 K = L = Q TC = 6 Q 1.67 .67 MC = 10 Q LRAC and LRMC 100 90 80 70 60 50 40 30 20 10 0 0 5 3 0 2 5 2 0 10 5 1 Quantity Produced LRAC LRMC B1) When K = 100 .4 .2 Q = 100 L = 6.310 L .2 L = (Q6.310) = .0001 Q 5 C= (2)(.0001) Q + 400 4 MC = .001Q 4 AC = .0002Q + 400Q
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