. A firm’s production is represented by the following function: Q = L0.4 K0.6 . The rental rate of capital (r) is $30 and the wage rate (w) is $5. For a given level of output, what should be the ratio of capital to labor in order to minimize costs? How much capital and
12. A firm’s production is represented by the following function: Q = L0.4 K0.6 . The rental rate of capital (r) is $30 and the wage rate (w) is $5.
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For a given level of output, what should be the ratio of capital to labor in order to minimize costs?
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How much capital and labor should be used to produce 600 units of output? What is the total cost?
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What is the short run total cost if output is decreased to 300 units?
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What would be the optimal choice of capital and labor in the long run in order to
produce 300 units of output? What is the long-run total cost?
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Does this production function exhibit increasing, decreasing, or constant returns to
scale? Please answer based on the cost calculations in parts c and d.
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