Question
A firm with the production function Q = F(K, L) is producing an output level Q* at minimum cost in the long run using the
A firm with the production function Q = F(K, L) is producing an output level Q* at minimum cost in the long run using the input mix of K* and L* . At output level Q*, how will its short-run marginal cost when K is fixed at K* compare with its long-run marginal cost? How will its short run average total cost at Q*, compare to its long run average total cost? If the firm increases output to Q+Q, how will its short-run marginal cost compare to its long run marginal cost? How will its short run average total cost compare to its long run average total cost?
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