The output level (q) for a competitive firm is determined by log(q) = alog(zi) where zi denotes its usage of input i and a > 0 denotes a parameter where i = 1, 2, ..., m. (a) Derive the long-run average and marginal cost functions. Will marginal cost rise with output? (b) Derive the short-run marginal cost function if only k of the m inputs are variable. (c) Derive the short-run elasticity of supply and then show what happens to this elasticity if k is redu

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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The output level (q) for a competitive firm is determined by
log(q) = [ailog(zi)
where zi denotes its usage of input i and a; > 0 denotes a parameter where i = 1, 2, ..., m.
(a) Derive the long-run average and marginal cost functions. Will marginal cost rise with output?
(b) Derive the short-run marginal cost function if only k of the m inputs are variable.
(c) Derive the short-run elasticity of supply and then show what happens to this elasticity if k is reduced.
Transcribed Image Text:The output level (q) for a competitive firm is determined by log(q) = [ailog(zi) where zi denotes its usage of input i and a; > 0 denotes a parameter where i = 1, 2, ..., m. (a) Derive the long-run average and marginal cost functions. Will marginal cost rise with output? (b) Derive the short-run marginal cost function if only k of the m inputs are variable. (c) Derive the short-run elasticity of supply and then show what happens to this elasticity if k is reduced.
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