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    Httpsmoodle - Aau.atpluginfile - Php1536693mod Resourcecontent10ProblemSet4 PDF

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    This document is a problem set for a microeconomics course covering production functions, costs, and cost minimization. It contains 4 problems analyzing production functions and their properties, including calculating output levels, marginal products, and technical substitution rates. It also covers solving a firm's cost minimization problem and deriving the long-run cost, marginal cost, and average cost functions.

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    Httpsmoodle - Aau.atpluginfile - Php1536693mod Resourcecontent10ProblemSet4 PDF

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    zouna7765
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    This document is a problem set for a microeconomics course covering production functions, costs, and cost minimization. It contains 4 problems analyzing production functions and their properties, including calculating output levels, marginal products, and technical substitution rates. It also covers solving a firm's cost minimization problem and deriving the long-run cost, marginal cost, and average cost functions.

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    This document is a problem set for a microeconomics course covering production functions, costs, and cost minimization. It contains 4 problems analyzing production functions and their properties, including calculating output levels, marginal products, and technical substitution rates. It also covers solving a firm's cost minimization problem and deriving the long-run cost, marginal cost, and average cost functions.

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    6 views2 pages

    Httpsmoodle - Aau.atpluginfile - Php1536693mod Resourcecontent10ProblemSet4 PDF

    Uploaded by

    zouna7765
    This document is a problem set for a microeconomics course covering production functions, costs, and cost minimization. It contains 4 problems analyzing production functions and their properties, including calculating output levels, marginal products, and technical substitution rates. It also covers solving a firm's cost minimization problem and deriving the long-run cost, marginal cost, and average cost functions.

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    © All Rights Reserved
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    of 2

    Microeconomics Problem Set No.

    4
    Winter term 2023/24
    Claudia Salim, Paul Schweinzer and Norbert Wohlgemuth

    1. Assume the production function Q(K) = 2K 3 + 6K 2 + K, with output Q as


    a function of the sole input capital K.
    (a) At which value of K is output Q maximised?
    (b) At which value of K is the average product Q/K maximised?
    (c) At which value of K is the average product of capital Q/K equal to it
    marginal product dQ/dK?
    (d) Draw the graphs of Q, dQ/dK, and Q/K for 0  K  3.2. Explain in
    general terms the linkage between average product and marginal product.
    (e) For which values of K with 0  K  3.2 does total product Q increase
    or decrease? For which values is it concave or convex in K?
    p
    2. A firm’s production function is given by Q = Q(L, K) = 4 LK.
    (a) Draw the isoquants for Q1 = 600 and Q2 = 800, with L on the horizontal
    axis (”abscissa”).
    (b) In the short term labour is assumed to be constant at L = 25.
    i. How much capital K is required for the two production levels Q1 =
    600 and Q2 = 800?
    ii. Calculate for these production levels the marginal products of labour,
    M PL , and of capital, M PK .
    (c) Based on your results from (b), calculate the technical rate of substitution
    T RSL,K for the production levels Q1 and Q2 .
    3 2
    3. Production is described by the function Q(L, K) = 10L 4 K 4 .
    (a) Compute output Q provided L = 30 und K = 20.
    (b) Express equation of the isoquant representing an output level of Q =
    1000, by specifying K as a function of L.
    (c) Calculate the technical rate of substitution, T RSL,K , in general terms,
    and assuming L = 30 and K = 20.
    (d) Based on your result in (c), by how much would input of K have to be
    increased to compensate a decreased labour input of one unit (to keep
    output constant)?

    4. Consider a firm with the (Cobb-Douglas-type) production function Q(L, K) =


    1 1
    4L 3 K 2 , where L denotes units of labour and K units of capital used in the
    production process. Assume that the firm faces input prices of w = 7 per unit
    of labour, and r = 10 per unit of capital.
    (a) Solve the firm’s cost-minimisation problem to obtain the combination
    of inputs L and K that minimises the firm’s cost of producing a given
    amount of output Q.
    (b) Use your results from (a) to find the firm’s long-run cost function C(Q).
    Hint: as all inputs are variable, this is its long-run total cost.
    (c) Find the firm’s marginal cost function, M C(Q), and its average cost
    function, AC(Q).

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