Questions 1-17: Multiple Choice
|#||Form A||Form B|
Done in class.
a) We plug K=25 into the production function, obtaining short-run production function Q(L) = f(L,25) = 5 + 10L1/2.
b) Up to Q(0) = 5 robots may be produced without using any labor.
c) With a capital rental rate of $50 and 25 units of capital, the fixed cost of capital is 25 x 50 = 1250. The variable cost is zero since no labor is needed for up to 5 robots. This means the total cost is TC = $1250 and the average total cost is AVC = 1250/Q. Graph these to obtain the answer.