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Suppose that firm’s production function is Q=min {2K, 4L}, and r=8$ and w=16$. Find the firm’s...

Suppose that firm’s production function is Q=min {2K, 4L}, and r=8$ and w=16$. Find the firm’s long-run total cost and average cost in terms of output.
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Answer #1

According to the production function we have Q = 2K and Q = 4L. This gives K = 0.5Q and L = 0.25Q

Cost function is C = wL + rK

C = 16*0.25Q + 8*0.5Q

C = 8Q

Average cost = Marginal cost = $8 per unit

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