Suppose a Firm's Production Function Is Given by Q =

question 62

Essay

Suppose a firm's production function is given by Q = F(L,K)= 5LK,where L is the amount of labor and K is the amount of capital.The wage rate is $100 per unit of labor and the rental rate of capital is $50 per unit of capital.
a.What is the least-cost combination of capital and labor if the firm produces 1000 units of output?
b.What is the firm's long run cost function?
c.If the firm currently uses 10 units of capital,what is its short-run cost function?

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Definitions:

Oligopoly

A market structure characterized by a small number of firms controlling a large portion of the market share, leading to limited competition.

Long-run Equilibrium

A state in which all factors of production and costs are variable, and all firms in an industry are making normal profit, resulting in market stability over time.

Average Total Cost

The total cost of production (fixed and variable costs) divided by the total quantity of output produced.

Profit-maximizing Price

The price at which a firm can sell its product to maximize its profit, determined by market demand and production costs.