Short run total cost curves (8 points). Suppose a biotech firm makes diagnostic tests and has a...

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Short run total cost curves (8 points). Suppose a biotech firm makes diagnostic tests and has a fixed-proportions production function in which one unit of output (diagnostic test) is produced using one worker and two units of capital (machines). If the firm has an extra worker and no more capital, it can produce only one unit of output. Similarly, one more unit of capital, without any additional workers, produces no extra output. The wage is 4 and the rental rate is 8. (a) (4 points) Suppose capital is fixed at 8 in the short run. Write down the formula for the short run total cost curve SRT C(Q). Note that the short run total cost curve will only be defined for Q = #, so your function should read SRT C(Q) = ... when Q = # (You should fill in the correct number for Q). (b) (4 points) Find the cost-minimizing bundle of capital and labor to produce 100 units of output in the long run.

David · Accepted Answer

Short run total cost curves (8 points). Suppose a biotech firm makes diagnostic tests and has a fixed-
proportions production function in which one unit of output (diagnostic test) is produced using one 
worker and two units of capital (machines).

Short run total cost curves (8 points). Suppose a biotech firm makes diagnostic tests and has a fixed-proportions production function in which one unit of output (diagnostic test) is produced using...

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