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{40 points} Consider another rm with the following production function _ (iii Digsa f{K'L]_{12KiLi, pg } Basically, the rm experiences the constant return to scale
{40 points} Consider another rm with the following production function _ \"(iii Digsa f{K'L]_{12KiLi, pg } Basically, the rm experiences the constant return to scale (CBS) in the rst 3? units of production and then decreasing return to scale (DRS) after that. This is actually the reality of how rm usually makes zero prot in the rst phase of being in business and then starts making profit later, given that there are no entrants into the market. (a) (20 points) Using the cost minimization method, calculate the optimal level of labor L" and capital K' and the minimal total cost. Your answers should be a function of wage as, cost of capital r and output level 3'}. (b) (20 points} If wage as = S and cost of capital 1" = 4, at what level of output and price will this rm switch to having CR5 production function to having DRS production function
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