Question
A perfectly competitive firm operates in the short-run with labor as its only variable factor. Its production function is: Q = -L3 + 10L2
A perfectly competitive firm operates in the short-run with labor as its only variable factor. Its production function is:
Q = -L3 + 10L2 + 88L
where Q is output per week measured in tons and L is the number of workers employed. The weekly wage is $324 and the product sells for $3.24 per ton.
(a) At what weekly output is marginal cost equal to average variable cost?
(b) What is the minimum product price at which the firm will operate in the short-run?
(c) How many workers should the firm employ to maximize profits?
(d) Calculate the firm's point elasticity of demand for labor at the equilibrium in (c) above.
Step by Step Solution
3.44 Rating (160 Votes )
There are 3 Steps involved in it
Step: 1
To solve the questions we need to understand the concepts of marginal cost MC average variable cost ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started