A firm uses machines (K) and labour (L) to produce output (Q). The production function is Q = L + 3K. Wages w = 2 for every unit of labour and r = 1 for every machine hour. The firm is not sure yet what amount Q will produce.

(a) Use Cost Minimization to find factor demand functions L*(Q) and K*(Q).

(b) Explain what demand functions represent in this situation

(c) Find the following 3 long-run cost curves: T C(Q), MC(Q), and AC(Q).

(d) Graph the three curves from part (c).

(e) The firm produces Q = 50 units. Find: Total Cost, Marginal Cost, Average Cost, L*, and K*.