ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Step 1: State the given information
VIEW Step 2: a) Determine the quantity each pizza shop would produce for any price in the market
VIEW Step 3: b) Discuss whether answer in part (a) depends on FC
VIEW Step 4: c) Derive an expression for the short-run market supply
VIEW Step 5: d) Find the short-run equilibrium price and quantity
VIEW Step 6: e) Compute the short run profit function for individual firm
VIEW Step 7: f) Ascertain whether there is a nonzero price low enough to shutdown in short run
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- Suppose w= 1 and r= 3. Solve the cost minimization problem to find L*(q) and K*(q). Then find the cost function C(q).arrow_forwardA10arrow_forwardThe cost function of a firm is c(y) = 3y^2 + 6y + 5.1. Find the Average variable and Marginal Cost curves of the firm.2. What is the quantity level where the average variable cost is minimized?arrow_forward
- Suppose the short-run production function for a restaurant producing a pack of food is given by: Q = 3L – 0.312 Where Q is the number of packs of food produced and L is the amount of labour used. If the cost of a unit of labour is ¢6 and the unit price of a pack of food produced is ¢10, a) what is the amount of labour the restaurant should employ in order to maximize profit. b) How much profit is made?arrow_forwardONLY answer question b. relative to question a.arrow_forwardA firm operates in the short run with the production function Q = 10 K0.5 L 0.5, where Q is output, K is capital, and L is labor. The price of capital is $100 per unit, and the wage rate is $50 per unit of labor. How many units of capital and labor should the firm use to minimize its total cost while producing 400 units of output?arrow_forward
- The production function for a product is given by q= 10K^(1/2)L^(1/2) where K is capital, and L is labor and q is output d) Now suppose w =30 and r = 120. What is the minimum cost of producing q=1000. (You must show your work by clearly writing the equations that you use to derive the cost minimizing levels of L and K.) e) Now suppose that the firm is in the short run and cannot vary the amount of capital. That is, it must use the same amount of capital as in part d). However, the firm wants to produce 1200 units of output. How much labor should it use to minimize its cost and what is the minimum cost of producing q =1200?arrow_forward22-23. Use this information to answer questions 22 and 23. A typical firm has a total cost function given by: TC = A.Q² + B.Q+ (C+D), where A, B, C & D are all positive constants and the term D represents the firm's fixed costs. 22. Suppose that the term C in the total cost function changes to a new figure that is twice as large. Thinking about the cost curves drawn on a graph, we would expect the following to happen (choose the best answer): A) B) H) I) J) ABOADAGAS 23. Use the information about the total cost function supplied above. The marginal cost curve will shift or rotate whenever (choose the best answer): A) B) C) D) H) I) Both the average variable cost curve AND the average cost curve shift (or rotate) down. Both the average variable cost curve AND the average cost curve shift (or rotate) up. The average cost curve shifts (or rotates) down. The average cost curve shifts (or rotates) up. J) The level of quantity where average cost is minimized falls. The level of quantity…arrow_forwardAssume a firm's short-run cost function is given by the following expression: C(q) = 2+q+q² - If the firm can sell each unit of their output at a price of p maximizing level of output in the short-run? Profit maximizing q = dollars, what is the firm's profitarrow_forward
- A firm has the following Cobb-Douglas production function: q=(L^α)(K^1-α)0<α < 1 is a parameter. Suppose in the short run K = 1. The rental rate of a unit of K is $10, and the wage rate of a unit of L is $20.(a) Derive the marginal cost of the firm (expressed in terms of α and q).(b) Derive the average variable cost of the firm (expressed in terms of α and q).(c) Derive the cost function of the firm.arrow_forwardhandwrite it out step by steparrow_forward
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