A reasonably realistic model of a firms costs is given by the short-run Cobb-Douglas cost curve C(q)

Question:

A reasonably realistic model of a firm’s costs is given by the short-run Cobb-Douglas cost curve

C(q) = Kq1∕a + F,

where a is a positive constant, F is the fixed cost, and K measures the technology available to the firm.
(a) Show that C is concave down if a > 1.
(b) Assuming that a < 1, find what value of q minimizes the average cost.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Applied Calculus

ISBN: 9781119275565

6th Edition

Authors: Deborah Hughes Hallett, Patti Frazer Lock, Andrew M. Gleason, Daniel E. Flath, Sheldon P. Gordon, David O. Lomen, David Lovelock, William G. McCallum, Brad G. Osgood, Andrew Pasquale

Question Posted: