Economics questions

Nov 2nd, 2014
Price: $35 USD

Question description

1. Explain if each of the following statements is true or not:

i. If average product is increasing, marginal product must be less than average product.

ii. If marginal product is negative, average product must be negative.

iii. If average product is positive, total product must be increasing.

2. Suppose that a firm has the production function given by f(x1,x2)=4√(x1x2). Let w1 = $64 and w2 = $1. What is the total cost of producing 20 units of output in the long-run?

3. Consider the same firm as in question 2, who is facing the same input prices

w1 and w2 as above. Suppose that we are now in the short-run and the

firm has to use x2 = 4. What is the short-run cost of producing 72 units of 


4. A firm produces an output using capital and labor using the production technology described by f(xL,xK) = xLxK. Let w denote the price of labor and r denote the price of capital. Assume that w = $2 and r = $1. Derive the equations for the total, average and the marginal cost functions of this firm. 

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