Y5

Suppose the technology for gizmo production is q = {4 + 24VKL + 2K + 81} /2 , and in the short run there are 100 firms in this market. Besides the production cost these firms also have a fixed cost of F = 37 for having a retail outlet, since they sell their gizmos in the retail market. Suppose that the factor prices are v = 2 and w = 8. (a) If all factors are variable (LR), find the cost for gizmo production for each firm. What is the individual (LR) supply for each firm and what is the (LR) supply for the industry as a whole with the 100 firms? (b) If this is a constant cost industry, what is the (VLR) very long run supply (entry and exit allowed) for this industry