Problem 1 (cost minimizing and cost curves, long-run and short-run) The production function is given by Q (L, K) = 5LK. The wage is w = 8 and the capital rental is r = 32. a. What is the (long-run) cost-minimizing labor and capital that are needed to produce Q quantity of output? b. What is the (short-run) cost-minimizing quantity of labor that is needed to produce Q quantity of output, if capital in the short-run is fixed at K = 10. c. What is the long-run total cost function, TC(Q)? The AC(Q) function? The MC(Q) function? Draw the AC and the MC curves in the same graph! d. What is the short-run total cost function, STC(Q)? The SAC(Q) function? The SMC(Q) function? Draw the SAC and the SMC curves in the same graph! e. If we want to produce 500 units of output, how much would be the total cost of production in the long-run? How much is it in the short-run (when K = 10)? Problem 2 (short-run supply) Jerry & Co. is a producer of computer mice; the market of computer mice is perfectly competitive. Jerry's short-run total cost curve is STC(Q) = 300 + 2Q + 0.502, where Q is the number of mice produced per month. Of the total fixed costs, $100 are sunk. a. What is the equation for the short-run average cost SAC (Q)? The short-run average variable cost AVC (Q)? b. What is the equation for the short-run average nonsunk cost ANSC(Q)? c. What is Jerry's short-run supply curve of computer mice? Draw the SR supply curve