Question
a firm has the following production function: q = L 2 1 K 2 1 Assume the firm must pay each unit of labor a
a firm has the following production function:
q=L21K21
Assume the firm must pay each unit of labor a wage of $1 (w=1) and each unit of capital a rental rate of $4 (r=4). In the short run, the firm's capital is fixed at 4 units (k =4) and the firm is maximizing their profits by producing 8 units of output (Q=8) which of the following must be true?
A: The cost of producing 8 units of output is lower in the long run
B: The cost of producing 8 units of output is higher in the long run
C: The cost of producing 8 units of output is the same in the long run and the short run
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