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Week 6 Exercises
1. TP = 16L – 2
a. Derive the real labor demand function.
b. Compute labor employment level when W=12 and P=1.
c. Compute labor employment level when W=3 and P=1.
d. Repeat the question #b and #c with P=10.
2. Q=3KL, and r=2, w=24 and K=4 in short run. Compute short run FC, VC, MC, AFC, AVC
and ATC and graph them all.
3. Q=3KL, and r=2 and w=24.
a. Derive long run cost function and graph the iso-cost and isoquants.
b. Suppose that the cost of production is limited to $200, derive the corresponding cost
function and graph it.
c. Graphically show the maximum level of output in the given cost constraint.
a. Cost function is given that 10K+10L=100. Draw the corresponding cost function and
isoquant and identify the location for the optimal output level.
b. Cost function is given that 10K+20L=100. Repeat #a.
c. Verify if there is substitution or scale effect from here.
d. Derive the labor demand curve from this example.
5. Canadian workers (C) vs Foreign workers (F), WC=20 and WF=10;
a. C and Fare 1-for-1 substitutes. Draw the corresponding isoquant and compute the employment level of the workers. Assume C=200.
b. C and Fare 1-for-1 complements. Draw the corresponding isoquant and compute
the employment level of the workers. Assume C=200.
6. Textbook problems: Chapter 5 #1, 2, 4, 5, and 6.
Such a cheap price for your free time and healthy sleep
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