Suppose all firms in an industry have a production technology described by the production function .The cost of labor is 2 and the cost of capital is 4, and each firm faces a recurring fixed cost of 300.
a.Derive the long run cost and average cost functions for each firm.(Hint: Given the shapes of the isoquants implied by the production function, you should be able to do this without solving a calculus problem.)
b.What is the long run equilibrium output price?
c.How much does each firm produce in long run equilibrium?
d.Suppose market demand is given by .How many firms are in the industry in long run equilibrium?
e.Suppose the industry is currently in long run equilibrium.Derive the short run cost function for each firm (assuming labor is variable but capital is fixed in the short run).f.Now suppose that demand falls to .What happens to output price in the short run? What happens to price and the number of firms in the long run?

Question

Suppose all firms in an industry have a production technology described by the production function  .The cost of labor is 2 and the cost of capital is 4, and each firm faces a recurring fixed cost of 300. 
a.Derive the long run cost and average cost functions for each firm.(Hint: Given the shapes of the isoquants implied by the production function, you should be able to do this without solving a calculus problem.)
b.What is the long run equilibrium output price?
c.How much does each firm produce in long run equilibrium?
d.Suppose market demand is given by  .How many firms are in the industry in long run equilibrium? 
e.Suppose the industry is currently in long run equilibrium.Derive the short run cost function for each firm (assuming labor is variable but capital is fixed in the short run).f.Now suppose that demand falls to  .What happens to output price in the short run? What happens to price and the number of firms in the long run?

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The Answer of Suppose all firms in an industry have a production technology described by the production function  .The cost of labor is 2 and the cost of capital is 4, and each firm faces a recurring fixed cost of 300. 
a.Derive the long run cost and average cost functions for each firm.(Hint: Given the shapes of the isoquants implied by the production function, you should be able to do this without solving a calculus problem.)
b.What is the long run equilibrium output price?
c.How much does each firm produce in long run equilibrium?
d.Suppose market demand is given by  .How many firms are in the industry in long run equilibrium? 
e.Suppose the industry is currently in long run equilibrium.Derive the short run cost function for each firm (assuming labor is variable but capital is fixed in the short run).f.Now suppose that demand falls to  .What happens to output price in the short run? What happens to price and the number of firms in the long run?

Suppose All Firms in an Industry Have a Production Technology