(a) Explain the distinction between short-run and the long-run decisions by firms from the point of view of an economist.

(b) Draw a firms short run and long run cost curves in the same graph, the short run cost curve would always be above the long run cost curve, except at one level of output. Why? What is special about this level of output?

(c) On a carefully labeled diagram, illustrate the cost minimizing bundle A for a firm with cobb-douglas technology. Now consider an increase in the quantity target to some point B. Draw the new bundle of inputs for the new cost minimizing choice of the firm and illustrate the expansion path.