ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:8.11. A firm produces a product with labor and capi-
tal as inputs. The production function is described by
Q = LK. The marginal products associated with this
production function are MP, = K and MP = L. Let
w = 1 and r = 1 be the prices of labor and capital,
respectively.
a) Find the equation for the firm's long-run total cost
curve as a function of quantity Q.
b) Solve the firm's short-run cost-minimization problem
when capital is fixed at a quantity of 5 units (i.e., K = 5).
Derive the equation for the firm's short-run total cost
curve as a function of quantity Q and graph it together
with the long-run total cost curve.
c) How do the graphs of the long-run and short-run
total cost curves change when w = 1 and r = 4?
d) How do the graphs of the long-run and short-run
total cost curves change when w = 4 and r = 1?
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