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Consider a firm using two inputs; capital (K) and labor (L) in production. The firm's production...

Consider a firm using two inputs; capital (K) and labor (L) in production. The firm's production technology is characterized by the following production function: Q = F(K, L) = 40K L In the short run (SR), the quantity of the capital (K) that the firm uses is fixed at K = 10 whereas the quantity of the labor input can be varied. Price of labor is $4,000 per worker and the price of capital is $2,000 per capital. (PL=$4,000 and PK=$2,000) Derive the equation of the TC as a function of Q in the short run and identify the variable and fixed cost component of the TC equation.

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Answer #1

WEER 12 o=UOKL Given K =10 So, o = 4OXIOL 0=400L on, l- o 400 Coming to cost, TC = whtrk TC = 4000 L + 2000K substitute halhe

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