A firm that produces shirts has a production function q=f(K,L)=K*L/10, that has a cost price of...

A firm that produces shirts has a production function q=f(K,L)=K*L/10, that has a cost price
of labor= $10 and cost price of capital=$100.
a) Find the isoquant if q=1 when q=2 and when q=3. Draw the graph.
b) Does this firm’s production exhibit increasing, decreasing or constant returns to
scale?
c) Find the labor demand and the capital demand, as a function of q.
d) Find the firm’s long-run cost function TC(q).
e) If the firm wanted to produce 1 more unit of shirts, how many units of labor and
capital should it use? How much will it cost? What if the firm wants to produce 2
units?
f) Find the firm’s long run average cost function, and marginal cost function. Graph
AC(q) and MC(q) and identify the firm’s long-run supply curve.

Expert Solution

Rahul Sunny answered 2 years ago

A firm that produces shirts has a production function q=f(K,L)=KL/10, that has a cost price of...

A firm that produces shirts has a production function q=f(K,L)=KL/10, that has a cost price of labor= $10 and cost price of capital=$100. Find the firm’s long run average cost function, and marginal cost function. Graph AC(q) and MC(q) and identify the firm’s long-run supply curve.

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