A production function for a good Q uses inputs of labor (L) and capital (K) and takes the form Q=LK. The wage is equal to $20 and the rental rate of capital is equal to $80. The firm has to produce a target qo. What is the equation for the firm's long-run total cost curve?

A production function for a good Q uses inputs of labor (L) and capital (K) and takes the form Q=LK. The wage is equal to $20 and the rental rate of capital is equal to $80. The firm has to produce a target qo. What is the equation for the firm's long-run total cost curve?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.7P

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

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