Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A firm has the following production function Y=K 0.25 L 0.25 . Total cost (TC) is given by TC=w L L+w K K+ZC, where w

A firm has the following production function Y=K0.25L0.25. Total cost (TC) is given by TC=wLL+wKK+ZC, where wLand wKare prices of the two inputs L and K, and ZC are costs that the firm has to pay regardless of production volume as long as it is operative.

A) Derivetotal cost as a function of output C(Y). Derive marginal cost MC and average cost AC.

B) Assume that the firm is one of many identical ones operating on a perfectly competitive market that is in long run equilibrium. ZC is 1800 and wLand wKare both equal to 1. What are the price of the product and how much does each of the firms produce?

C) The same economy is inhabited by two different types of consumers. Type A consumers have the utility functionUA=yx, and Type B consumersUB=[4ln(yx)]3. ydenotes how much the individual consumes of the good produced by the firms in a) and b) above and x represents consumption of another good. Both two types of consumers have an Income of I. State the demand function for good y for the two types of consumers.

D)

If there are 20.000 units of Y sold in equilibrium, the consumers earn an income of 1200 each, and the price of good x is 60,how many consumers are there in total if

  1. There are only type A consumers in the economy
  2. There are only type B consumers in the economy
  3. 50% of the consumers are of type A and 50 % of type B

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Land Economics Research

Authors: Joseph Ackerman, Marion Clawson, Marshall Harris

1st Edition

1317340426, 9781317340423

More Books

Students also viewed these Economics questions

Question

2. In what way can we say that method affects the result we get?

Answered: 1 week ago