Production function is Q = (KL)^1/3
MRTS = K/L and w/r = 1/1 = 1
At optimum input choice MRTS = w/r or K/L = 1.
This gives K = L and so Q = (L)^2/3 or L = Q^1.5 and K = Q^1.5
Cost function is C = 1L + 1K
C = Q^1.5 + Q^1.5
C = 2Q^1.5
Marginal cost = 3Q
At P = 3, Q is 1 This is because P = MC is used.
Producer surplus = 0.5*(price – minimum MC)*Q
Hence PS = 0.5*(3 – 0)*1 = $1.5
Producer surplus is $1.50
Consider the firm with production function given by q = f(L,K) = Lź Kả.lfw== = 1,...
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