Asked by GETU
If a firm's total cost function Tc= 100-12Q+0.6Q2 where TC is total cost in birr and Q is units of output then find the following
MC,TFC,TVC,AVC
MC,TFC,TVC,AVC
Answers
Answered by
GETU
Assume that a firms production function is given as Q= L2/3 k1/3. Determine MPL,MPK,MRTSLK and whether production function exhibits increasing, decreasing or constant returns to scale
Answered by
GPT 3.5
To find the marginal cost (MC), we need to find the derivative of the total cost function (TC) with respect to the quantity of output (Q).
TC = 100 - 12Q + 0.6Q^2
To find the marginal cost, we take the derivative of TC with respect to Q:
MC = dTC/dQ = -12 + 1.2Q
To find the total fixed cost (TFC), we need to identify the portion of total cost that does not change with the level of output. In this case, the fixed cost is the constant term of the total cost function, which is 100.
TFC = 100
To find the total variable cost (TVC), we need to identify the portion of total cost that changes with the level of output. In this case, the variable cost is the portion of the total cost function that depends on the level of output, which is -12Q + 0.6Q^2.
TVC = -12Q + 0.6Q^2
To find the average variable cost (AVC), we need to divide the total variable cost by the quantity of output (Q):
AVC = TVC/Q = (-12Q + 0.6Q^2)/Q = -12 + 0.6Q
TC = 100 - 12Q + 0.6Q^2
To find the marginal cost, we take the derivative of TC with respect to Q:
MC = dTC/dQ = -12 + 1.2Q
To find the total fixed cost (TFC), we need to identify the portion of total cost that does not change with the level of output. In this case, the fixed cost is the constant term of the total cost function, which is 100.
TFC = 100
To find the total variable cost (TVC), we need to identify the portion of total cost that changes with the level of output. In this case, the variable cost is the portion of the total cost function that depends on the level of output, which is -12Q + 0.6Q^2.
TVC = -12Q + 0.6Q^2
To find the average variable cost (AVC), we need to divide the total variable cost by the quantity of output (Q):
AVC = TVC/Q = (-12Q + 0.6Q^2)/Q = -12 + 0.6Q
Answered by
GPT 3.5
To find the marginal product of labor (MPL), we take the derivative of the production function with respect to labor (L):
Q = L^(2/3) * K^(1/3)
Taking the derivative with respect to L:
MPL = (2/3) * L^(-1/3) * K^(1/3)
To find the marginal product of capital (MPK), we take the derivative of the production function with respect to capital (K):
MPK = (1/3) * L^(2/3) * K^(-2/3)
To find the marginal rate of technical substitution of labor for capital (MRTSLK), we take the derivative of L with respect to K:
MRTSLK = -∂Q/∂K / ∂Q/∂L
MRTSLK = -[(1/3) * L^(2/3) * K^(-2/3)] / [(2/3) * L^(-1/3) * K^(1/3)]
Simplifying,
MRTSLK = -K / 2L
The production function exhibits increasing returns to scale if doubling the inputs (L and K) more than doubles the output (Q).
To check for returns to scale, we can examine the relationship between the total product and total input. Let's consider doubling the inputs:
Q(2L, 2K) = (2L)^(2/3) * (2K)^(1/3) = 2^(2/3) * L^(2/3) * 2^(1/3) * K^(1/3)
Q(2L, 2K) = 2 * (L^(2/3) * K^(1/3)) = 2 * Q(L, K)
Since doubling the inputs leads to doubling the output, the production function exhibits constant returns to scale.
Q = L^(2/3) * K^(1/3)
Taking the derivative with respect to L:
MPL = (2/3) * L^(-1/3) * K^(1/3)
To find the marginal product of capital (MPK), we take the derivative of the production function with respect to capital (K):
MPK = (1/3) * L^(2/3) * K^(-2/3)
To find the marginal rate of technical substitution of labor for capital (MRTSLK), we take the derivative of L with respect to K:
MRTSLK = -∂Q/∂K / ∂Q/∂L
MRTSLK = -[(1/3) * L^(2/3) * K^(-2/3)] / [(2/3) * L^(-1/3) * K^(1/3)]
Simplifying,
MRTSLK = -K / 2L
The production function exhibits increasing returns to scale if doubling the inputs (L and K) more than doubles the output (Q).
To check for returns to scale, we can examine the relationship between the total product and total input. Let's consider doubling the inputs:
Q(2L, 2K) = (2L)^(2/3) * (2K)^(1/3) = 2^(2/3) * L^(2/3) * 2^(1/3) * K^(1/3)
Q(2L, 2K) = 2 * (L^(2/3) * K^(1/3)) = 2 * Q(L, K)
Since doubling the inputs leads to doubling the output, the production function exhibits constant returns to scale.
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