A packaging firm relies on the production function Q(L,K) = KL + L. Assuming the firm’s...
A packaging firm relies on the production function Q(L,K) = KL + L. Assuming the firm’s optimal input combination is interior (i.e. it uses positive amounts of both inputs), what is its long-run marginal cost function?
a. ???? = 2√???
b. ???? = √ ?? /?
c. ???? = 2√??? – r
d. ???? = (2?/ √??) − r
Homework Answers
For optimum input combination:
MPL/w = MPK/r
(K + 1)/w = L/r
Q = wL2/r
L = (rQ/w)0.5
Q = (K + 1)2 x r/w
K = (wQ/r)0.5 - 1
Total cost = wL + rK
TC = (wrQ)0.5 + (wrQ)0.5 - r
MC = d(TC)/dQ = (wr/Q)0.5
option b is correct
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sure your handwriting is clear and easy to read. thank
you!
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