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