Business, 25.02.2021 17:40 jjelzy

Consider the following production function: ; and suppose that w is the wage paid for labour hours and r is the price per unit of capital. Suppose capital is fixed () and labour (L) is the only unknown factor of production.
Derive the cost minimizing demand for labour in the short run.
Now, suppose per hour and , compute the total cost, fixed cost and variable cost in the short run.
Now, assume that you can adjust capital as well as labour.
Derive the demand functions for labour and capital and the cost function in the long run.
Now, suppose per hour and , compute the total cost (TC), average cost (AC) and marginal cost (MC) in the long run.
Using (b) above, compute output elasticity to total cost and comment on the nature of firm’s economies of scale

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Consider the following production function: ; and suppose that w is the wage paid for labour hours a...

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