A plant’s production function is Q = L^1/3 K^2/3, where L is hours of labor and...

A plant’s production function is Q = L^1/3 K^2/3, where L is hours of labor and K is hours of capital. The price of labor services, w, is $40 per hour and of capital services, r, is $10 per hour.

a. Derive the long-run expansion path. In words describe what the expansion path represents.

b. In the short-run, the plant’s capital is fixed at K = 64. Labor, on the other hand, is variable. How much will it cost to produce 80 units of output in the short-run?

c. In the long-run, both labor and capital are variable. How much will it cost to produce 80 units of output in the long-run?

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Expert Solution

Rahul Sunny answered 4 weeks ago

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