The cost of yoghurt There are 2 firms in the yoghurt market, Dannon and Yoplait. They produce yoghurt using milk (M) and capital (K) according to the production function f(M, K) = 2√ MK where q is the quantity of yoghurt produced. The price of milk is p = 4, and the current price of capital is r = 1. In the short run, both firms have a fixed plant size, so that capital is fixed. Dannon has plant size K¯D = 100, while Yoplait has plant size K¯ Y = 81.
Â
Â
6. Yannick asserts that because capital is fixed in the short run and variable costs do not include the cost of capital, Dannon and Yoplait should have the same variable costs of producing any given amount of yoghurt. Is Yannick correct? Justify your answer.
7. Do the two firms have the same long-run cost function? Justify your answer without yet calculating the long-run cost function(s).
8. Derive the firms’ long-run cost function(s) C LR(q) using the Lagrange method. Please show all derivations.
9. Is it true that the long-run cost is lower than the short-run cost for Dannon at all output levels? Justify your answer analytically. (Hint: Analyze the sign of the difference C LR(q) − C SR,Dannon(q).)
Answers
Status NEW
Posted 05 Jun 2017 07:06 AM
My Price 7.00
-----------
Attachments
file 1496646962-Solutions file.docx preview (51 words )
S-----------olu-----------tio-----------ns -----------fil-----------e
-----------Hel-----------lo -----------Sir-----------/Ma-----------dam-----------
T-----------han-----------k y-----------ou -----------for----------- yo-----------ur -----------int-----------ere-----------st -----------and----------- bu-----------yin-----------g m-----------y p-----------ost-----------ed -----------sol-----------uti-----------on.----------- Pl-----------eas-----------e p-----------ing----------- me----------- on----------- ch-----------at -----------I a-----------m o-----------nli-----------ne -----------or -----------inb-----------ox -----------me -----------a m-----------ess-----------age----------- I -----------wil-----------l b-----------e q-----------uic-----------kly----------- on-----------lin-----------e a-----------nd -----------giv-----------e y-----------ou -----------exa-----------ct -----------fil-----------e a-----------nd -----------the----------- sa-----------me -----------fil-----------e i-----------s a-----------lso----------- se-----------nt -----------to -----------you-----------r e-----------mai-----------l t-----------hat----------- is----------- re-----------gis-----------ter-----------ed -----------onÂ----------- th-----------is -----------web-----------sit-----------e
-----------Tha-----------nk -----------you-----------
-----------
Not Rated(0)