Virksomhedsøkonomi (VØ el. EØ)
Hjælp til Short run økonomi
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Problem 2 Production, Cost, and Supply (Short Run)
Consider a firm with the following production function:
q =< (ak + bl)1/2
The firm's total costs can be written as
C = F + rk + wl
where F denotes a licensing fee that all producing firms need to pay in this industry
(i.e. the firm does not have to pay F if it shuts down).
1. Graph an isoquant map for this firm.
2. Assume that, in the short run, k is fixed at k0, while l is flexible. Find the firm's
contingent demand function for l in the short run. Illustrate it in your graph.
3. Calculate and graph the firm's short-run cost function.
4. Calculate and graph the firm's short-run supply function, assuming that the
firm is a price-taker and the market price is p.
5. What is the effect of an increase in F in terms of the short-run supply function?
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