8.17. A packaging firm relies on the production function Q ! KL K, with MPL !
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8.17. A packaging firm relies on the production function Q ! KL " K, with MPL ! K and MPK ! L " 1.
Assume that the firm’s optimal input combination is interior (it uses positive amounts of both inputs). Derive its long-run total cost curve in terms of the input prices, w and r. Verify that if the input prices double, then total cost doubles as well.
K ! 9).
MPK ! [L 1
2 " K1 2 ]K$1 2
MPL ! [L 1
2 " K1 2 ]L$1 2
Q ! (1L " 1K)
2
.
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