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
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Question
![Consider a firm with the production function:
Q(L,K) = LK
%3D
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.
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.
А.
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.
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
II.
reasoning
B.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4268a070-177f-45d0-86bf-cd7239651ef1%2F3244fbf8-c07e-4669-9e7c-36babb1e83af%2Fgwp6sp1b_processed.png&w=3840&q=75)
Transcribed Image Text:Consider a firm with the production function:
Q(L,K) = LK
%3D
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.
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.
А.
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.
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
II.
reasoning
B.
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