Homework Answers
Answer :— The firm would have a short cost distortion, because he can vary only labour, thus he is not able to operate on the long run expansion path. We know that the expansion path on any isoquant shows the least cost combination. The expansion path shows the cheapest way of producing each level of output. If the firm would be in the long run, it could work at the expansion path on the 3rd iso quant which lies on a lower iso cost line c=300. But due to time constraint he can vary only labour, so the firm has to operate on a higher iso cost line. The firm is not able to operate with the least cost combination.
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6. (10 points) Suppose a firm is facing the isoquants and isocosts from the graph below....
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q=20 with...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q=20 with the cost minimizing combination of K and L, where Q is output, Kis capital and L is labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. Are the short run total costs of producing Q=40 smaller or larger than the long...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q-20 with...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q-20 with the cost minimizing combination of K and L, where Q is output, Kis capital and Lis labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. Are the short run total costs of producing Q=40 smaller or larger than the long run...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q-20 with...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q-20 with the cost minimizing combination of K and L, where Q is output, Kis capital and Lis labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. Are the short run total costs of producing Q-40 smaller or larger than the long run...
Consider a firm facing conventional technology with U-shaped AVC and ATC and MC. The firm wants...
Consider a firm facing conventional technology with U-shaped AVC and ATC and MC. The firm wants to maximize profits given an exogenously fixed price of P = $20. Further, suppose the firm correctly determines that its short run profit maximizing output is 1000 given its costs and the exogenously fixed price of $20. Question 1A Using the axes as constructed below, depict marginal revenue and marginal cost curves that would support the conclusion that the optimal short run output is...
A. L=3; K=6 B. L=10; K=6 C. L=7; K=9 D. L=8; K=7 The graph below shows...
A. L=3; K=6
B. L=10; K=6
C. L=7; K=9
D. L=8; K=7
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q=20 with the cost minimizing combination of K and L, where Q is output, Kis capital and L is labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. In order to...
2. Short-run versus long-run costs and expenditures Aa Aa The following isoquants depict the technologically efficient...
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8. Suppose that the following graph shows a few of the isoquants for a firm's production...
8. Suppose that the following graph shows a few of the isoquants for a firm's production function for producing park benches. The firm's production function is Q = 20KVL. Suppose that the firm's goal is to produce Q= 160 in the cost minimizing way. The cost of a unit of capital (K) is $32 (r=$32) and the cost of a unit of labor is $32 (w=$32). a. Show the firm's cost minimizing isocost on the graph when the firm is...
2.(15 points) A firm uses capital and labor in its production process. Capital is fixed in...
2.(15 points) A firm uses capital and labor in its production process. Capital is fixed in the short run while labor is variable. Assume that the firm has acquired the optimal quantity of capital for the production of 100 units of output. Using typically shaped isoquants and isocost lines, demonstrate that the cost to the firm of increasing output to 200 units will be greater in the short run than in the long run. Identify the short-run expansion path and...
Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.
5. Profit maximization and shutting down in the short run Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent...
please help 2. Short-run versus long-run costs and expenditures Aa Aa - The following isoquants depict...
please help
2. Short-run versus long-run costs and expenditures Aa Aa - The following isoquants depict the technologically efficient bundles of labor and capital for producing 100, 150, and 175 units of output (labeled IQ IQ - 100), IQ IQ - 150), and IQ IQ = 175), respectively). Suppose the firm is initially using the cost-minimizing bundle of labor and capital for producing 150 units of output, represented by point CAPITAL 10 10 - 1751 100 - 1501 Ti 01...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q=20 with the cost minimizing combination of K and L, where Q is output, Kis capital and L is labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. Are the short run total costs of producing Q=40 smaller or larger than the long...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q-20 with the cost minimizing combination of K and L, where Q is output, Kis capital and Lis labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. Are the short run total costs of producing Q=40 smaller or larger than the long run...
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q-20 with the cost minimizing combination of K and L, where Q is output, Kis capital and Lis labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. Are the short run total costs of producing Q-40 smaller or larger than the long run...
A. L=3; K=6
B. L=10; K=6
C. L=7; K=9
D. L=8; K=7
The graph below shows a firm's isoquants and isocosts. The firm is initially producing Q=20 with the cost minimizing combination of K and L, where Q is output, Kis capital and L is labor. Suppose the owner decides to expand production to Q=40. However, he signed a lease on the capital necessary to produce Q=20, which he cannot get out of in the short run. In order to...
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please help
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