Question

1. An engineering firm has estimated the production function for your firm to be Q = VKL. This production function has marginal products given by MP = 0.5 MPx = 0.55 resulting in MRTS = K/L. The price of capital is r and the price of labor is w. In the short run, capital is fixed at K = 36 a. Find the short run production function. b. Find the short run cost function. c. Ifr = 100 and w = 10, how much will it cost to produce 20 units in the short run? we are now in the long run d. What are the returns to scale of this production function? e. Find the long-run cost function. f. If r = 100 and w = 10, how much will it cost to produce 20 units in the long run? g. What do your answers to c and f tell you about the relationship between long run and short run costs?

Answer 1

MRIS-KA = 1364 - CE92 36 TC 36r+ w2 SRTCE 36C10 + 10 (4ao) c) 36 SRTC 371.1 MRTSEK nloyy seen Sprerially 10 IL= 10K 17 17 YioK2 OY K 20 632 -63.2 63.20102 6.Srso0 Ret 1264 d Reto to sals SLAK AC 6CAR A Cos datrefun to Sza MA7