A firm has the following production function: q = L - K Assume the firm must pay each unit of labor a wage of $1 (w= 1) and each unit of capital a rental rate of $4 (r = 4). In the short-run, the firm's capital is fixed at 4 units (K = 4) and the firm is maximizing their profits by producing 8 units of output (q= 8). Which one of the statements below must be true: O The cost of producing 8 units of output is the same in the long-run and the short-run. O The cost of producing 8 units of output is lower in the long-run. O The cost of producing 8 units of output is higher in the long-run.

A firm has the following production function: q = L - K Assume the firm must pay each unit of labor a wage of $1 (w= 1) and each unit of capital a rental rate of $4 (r = 4). In the short-run, the firm's capital is fixed at 4 units (K = 4) and the firm is maximizing their profits by producing 8 units of output (q= 8). Which one of the statements below must be true: O The cost of producing 8 units of output is the same in the long-run and the short-run. O The cost of producing 8 units of output is lower in the long-run. O The cost of producing 8 units of output is higher in the long-run.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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