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Consider the Cobb-Douglas production function f(k,n) = {kni = {vkn. The factor prices are r = w = 4. The first input k is fixed
Consider the Cobb-Douglas production function f(k,n) = {kni = {vkn. The factor prices are r = w = 4. The first input k is fixed in the short run at the level k=9. In addition to the costs associated with hiring the two production factors, there are sunk costs of F$ = 4 and quasi-fixed costs of cf = 9. The government makes the firm pay a tax of t= 1 per unit of output produced. [Note: If your cost function happens to be c(y) = a + by2 for some constants a and b, your marginal costs are MC = 2by.] a) Draw the short-run MC, AVC and AC curves for 0
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