4.Assume a perfectly competitive firm with a strictly quasi-concave productionfunction, q = f(L, K), which has the property that MPL exhibits increasing marginalreturns and then diminishing marginal returns as L increases (holding Kconstant). Production also exhibits strict increasing returns to scale asproduction increases.a.Set up the long run cost minimizing optimization function and describe theresulting factor demand curves (what are they a function of). How would youuse this to generate the firm long run supply function?bSet up the long run profit maximizing optimization function (where the choicevariables are L and K). What is the difference in the resulting factor demandfunctions for each optimization compared to part a above? How would you usethis to generate the firm's long run supply function?C.Graph the long run cost function and include three short run cost functions allwith different levels of capital. Also graph the long run average and marginalcost curves and add in a set of short run MC and ATC curves.

A perfectly competitive firm with a strict quasi-concave production function is provided. The…

4. a. b C. Assume a perfectly competitive firm with a strictly quasi-concave production function, q = f(L, K), which has the property that MPL exhibits increasing marginal returns and then diminishing marginal returns as L increases (holding K constant). Production also exhibits strict increasing returns to scale as production increases. Set up the long run cost minimizing optimization function and describe the resulting factor demand curves (what are they a function of). How would you use this to generate the firm long run supply function? Set up the long run profit maximizing optimization function (where the choice variables are L and K). What is the difference in the resulting factor demand functions for each optimization compared to part a above? How would you use this to generate the firm's long run supply function? Graph the long run cost function and include three short run cost functions all with different levels of capital. Also graph the long run average and marginal cost curves and add in a set of short run MC and ATC curves.

4. a. b C. Assume a perfectly competitive firm with a strictly quasi-concave production function, q = f(L, K), which has the property that MPL exhibits increasing marginal returns and then diminishing marginal returns as L increases (holding K constant). Production also exhibits strict increasing returns to scale as production increases. Set up the long run cost minimizing optimization function and describe the resulting factor demand curves (what are they a function of). How would you use this to generate the firm long run supply function? Set up the long run profit maximizing optimization function (where the choice variables are L and K). What is the difference in the resulting factor demand functions for each optimization compared to part a above? How would you use this to generate the firm's long run supply function? Graph the long run cost function and include three short run cost functions all with different levels of capital. Also graph the long run average and marginal cost curves and add in a set of short run MC and ATC curves.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.8P

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