Suppose Noah and Naomi's short-run weekly production function for garden benches is F(L)=min{0,L−5}, where L represents...

Suppose Noah and Naomi's short-run weekly production function for garden benches is F(L)=min{0,L−5}, where L represents the number of hours of labor employed. The wage rate is $5 an hour.

For non-negative amounts of output, what is their short-run cost function?

C =5Q.

C =5 +25Q.

C = 25Q.

C =25 - 5Q.

C = 25 + 5Q.

Expert Solution

F(L)=min{0,L−5}

This is a type of fixed proportions production function.

Total Costs: C = wL where w is the wage rate of $5 an hour.

They use L - 5 amount of labor to produce Q amount of output.

L - 5 = Q

L* = Q +5

C = wL* = 5(Q +5) = 25 + 5Q. Option E)

Rahul Sunny answered 2 years ago

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