Suppose XYZ Furniture company makes sofas in a North Carolina production facility. The production of sofas requires labor (L) and capital (K). The production function describing the maximum number of sofas that be produced from a given level of these inputs: f(K, L) = K1/21/2. Workers are paid a wage of w = 10 per hour, and capital can be rented at a rate r=5. (a) Find the conditional factor demand functions for labor L and capital K. (b) Use the information from part 2a to form the firm's cost function. What is the average cost function? Draw this in a graph. (c) Initially, the firm forecasts that it will need to produce q=30 units of production. How much capital will it install? Suppose the output target unexpectedly rises to 45 units after the capital has been installed. In the short run the capital stock is fixed and cannot be changed. What is the firm's short-run production function? Does it display IRS, CRS, or DRS? (d) What amount of labor should the firm use to produce the 45 units at minimum costs? What are the variable costs of production? Fixed cost? What are total costs? What is the average cost of producing the 45 units? (e) Repeat part 2d assuming the output target falls to 20 in the short-run. (f) Use your answer to parts 2c, 2d, and 2e to plot three points on this firm's short-run average cost function. How does this compare with the company's long-run average cost function? chapter 9.pdf chapter 8.pdf 显示全部 MacBook DII FB DD FO F5 F6 F10 11 512 & +