Consider a firm with the production function: Q(L,K) = LK Suppose the wage rate, w, is $6 per unit of labor and the rental rate, r, is $24 per unit of capital. A firm wants to produce 100 units of output. A. B. Suppose that in the short run, capital is fixed at 2 units. Find the labor input required to produce 100 units of output and the firm's short run total cost. Now suppose the firm is in the long run. Find the firm's cost-minimizing input combination and the total cost of producing 100 units of output. How do long run costs compare to short run costs? I. II. Given the firm's production function, Q(L,K) = LK, do you expect the firm's long run average cost to increase or decrease with output? Explain your reasoning
Consider a firm with the production function: Q(L,K) = LK Suppose the wage rate, w, is $6 per unit of labor and the rental rate, r, is $24 per unit of capital. A firm wants to produce 100 units of output. A. B. Suppose that in the short run, capital is fixed at 2 units. Find the labor input required to produce 100 units of output and the firm's short run total cost. Now suppose the firm is in the long run. Find the firm's cost-minimizing input combination and the total cost of producing 100 units of output. How do long run costs compare to short run costs? I. II. Given the firm's production function, Q(L,K) = LK, do you expect the firm's long run average cost to increase or decrease with output? Explain your reasoning
Chapter10: Cost Functions
Section: Chapter Questions
Problem 10.3P
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 9 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc