Following is a firm's production function for soccer balls: a = √k₂l, where k₁ is the fixed amount of k(capital equipment) in the short run, and I is the amount of labor. a) b) c) d) Calculate the firm's short-run total costs as a function of q, v, w and k₁ (where v = unit capital price; w = unit labor price) Given q, v, and w, how should the capital stock be chosen to minimize short-run total cost? 3) Using your answer from b) above, calculate the long-run total cost of soccer ball production. For v=$1, w=$4, and k₁=100, at what level of q is short-run cost function tangent to the long-run cost function?
Following is a firm's production function for soccer balls: a = √k₂l, where k₁ is the fixed amount of k(capital equipment) in the short run, and I is the amount of labor. a) b) c) d) Calculate the firm's short-run total costs as a function of q, v, w and k₁ (where v = unit capital price; w = unit labor price) Given q, v, and w, how should the capital stock be chosen to minimize short-run total cost? 3) Using your answer from b) above, calculate the long-run total cost of soccer ball production. For v=$1, w=$4, and k₁=100, at what level of q is short-run cost function tangent to the long-run cost function?
Chapter10: Cost Functions
Section: Chapter Questions
Problem 10.4P
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