Given the following production function, where K (capital) and L (labor), that cost the firm r (rental rate) and w (wage).
Q = 3L2/3K2/3
Write down the expression for the production function where fixed capital level is 125 units and only input level that firm can vary is labor.
Based on 1, find MPL and APL.
Find FC, VC(q), AC(q) and MC(q) using information from part 1 and 2. Do these curves describe the firm in the short run or long run?
If a $100 fee is imposed on the company, regardless of production. What are the new values of FC, VC(q), AC(q), and MC(q)?
Imagine that the same firm is free to select any quantity of capital and labor it wants, what types of returns to scale will it experience?
Given the following production function, where K (capital) and L (labor), that cost the firm r (rental rate) and w (wage).
Q = 3L2/3K2/3
Write down the expression for the production function where fixed capital level is 125 units and only input level that firm can vary is labor.
Based on 1, find MPL and APL.
Find FC, VC(q), AC(q) and MC(q) using information from part 1 and 2. Do these curves describe the firm in the short run or long run?
If a $100 fee is imposed on the company, regardless of production. What are the new values of FC, VC(q), AC(q), and MC(q)?
Imagine that the same firm is free to select any quantity of capital and labor it wants, what types of returns to scale will it experience?
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Related questions
Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
| Output (Q) | Total Cost |
| 0 | 25 |
| 1 | 50 |
| 2 | 100 |
| 3 | 120 |
| 4 | 155 |
| 5 | 190 |
| 6 | 250 |
| 7 | 390 |
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?
