Question
Consider a firm with the following production function = 20 2 1 2 For the whole exercise let the price of a unit of capital
Consider a firm with the following production function = 20 2 1 2 For the whole exercise let the price of a unit of capital be $200, the price of a unit of labor be $150 and consider the case where capital is fixed at = 1. a) Calculate the short run profit of the firm when the price of output is $300. (5 points) b) Calculate the short run cost function. (5 points) c) On the same graph, plot the short run average variable cost, average fix cost and marginal cost. (5 points) d) What is the price at which the firm will shut down in the short run (e.g. produce y = 0)? (5 points)
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