Suppose that a firms fixed proportion production function is given by: q = min (5K, 10L), and...
Question:
Suppose that a firms fixed proportion production function is given by: q = min (5K, 10L), and that r = 1, and w = 3.
a. Does this function exhibit decreasing, constant, or increasing returns to scale?
b. Calculate the firm's long-run total, average, and marginal cost curves.
c. Suppose that K is fixed at 10 in the short run. Calculate the firm's short-run total, average, and marginal cost curves. What is the marginal cost of the 10th unit? The 50th unit? The 100th unit?
Cost Function:
The cost function measures the minimum cost of producing a given level of output for some fixed input prices. It gives us an idea about the technological choices available to the firm.
Answer and Explanation: 1
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View this answer(a) A production function exhibits constant returns to scale if the following holds:
{eq}F(\lambda K, \lambda L) = \lambda F(K,L) {/eq} for...
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Cost Function in Calculus: Formula & Examples
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Chapter 20 / Lesson 13
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Learn about the cost function formula. Discover how to find cost function. Explore average cost function and marginal cost function. See examples of finding the cost.
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