A firm has production function q = K¹/2L¹/2 and pays w = 8, r = 2. a. The firm produces qo = 2 units of output as lowest cost. Capital should be equal to b. At qo = 2, the Isocost Line will have a vertical intercept equal to C. The firm wishes to expand to q₁ = 4. In the short-run the firm cannot vary its capital. Labour should be equal to

A firm has production function q = K¹/2L¹/2 and pays w = 8, r = 2. a. The firm produces qo = 2 units of output as lowest cost. Capital should be equal to b. At qo = 2, the Isocost Line will have a vertical intercept equal to C. The firm wishes to expand to q₁ = 4. In the short-run the firm cannot vary its capital. Labour should be equal to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

A firm has production function q = K¹/2L¹/2 and pays w = 8, r = 2.
a.
The firm produces qo = 2 units of output as lowest cost. Capital should be equal to
b.
At qo= 2, the Isocost Line will have a vertical intercept equal to
C.
The firm wishes to expand to q₁ = 4. In the short-run the firm cannot vary its capital. Labour should be
equal to
d.
At q₁ = 4, short-run average variable cost is equal to
e.
At q₁ = 4, long-run average cost is equal to

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