Consider the following production function q = K a L b. Assume that a+b>1. Assume that...

Consider the following production function q = K ^a L ^b. Assume that a+b>1. Assume that the firm takes price of labor w, price of capital r and price of the final product p as given and minimizes costs to produce a given level of output q. Find the share of labor cost in total value of the product wL/pq as a function of q, input prices, a and b (there should not be p in your function). How does wL/pq change as q increases in your function? Explain your answer intuitively for your answer.

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Rahul Sunny answered 2 months ago

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