Assume a company is producing 600 units of output per day and minimizing total cost with the following isoquant graph. Both the price of labor (w) and the price of capital (r) are $100 per day. Now assume they want to increase production to 800. Use the graph and complete sentences (and the numbers from the situation provided) to explain whether marginal cost would be higher in the short run or long run or will the MC be the same in both the SR and LR. That is, what is the MC is the short run and the MC in the long run? Explain. K
Assume a company is producing 600 units of output per day and minimizing total cost with the following isoquant graph. Both the price of labor (w) and the price of capital (r) are $100 per day. Now assume they want to increase production to 800. Use the graph and complete sentences (and the numbers from the situation provided) to explain whether marginal cost would be higher in the short run or long run or will the MC be the same in both the SR and LR. That is, what is the MC is the short run and the MC in the long run? Explain. K
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 4.10P
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Transcribed Image Text:Assume a company is producing 600 units of output per day and
minimizing total cost with the following isoquant graph. Both the price of
labor (w) and the price of capital (r) are $100 per day.
Now assume they want to increase production to 800. Use the graph and
complete sentences (and the numbers from the situation provided) to
explain whether marginal cost would be higher in the short run or long
run or will the MC be the same in both the SR and LR. That is, what is
the MC is the short run and the MC in the long run? Explain.
K
16
13.5
12
Q=800
Q=600
10 13 17 20
21
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