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Consider a firm whose production function is q = (KL)1/4 Q1a. (5 marks) Find the short-run cost function CShort(q;w, r, K ) Q1b. (5 marks)
Consider a firm whose production function is
q = (KL)1/4
Q1a. (5 marks)
Find the short-run cost function
CShort(q;w, r, K )
Q1b. (5 marks)
Find the long-run cost function
CLong(q;w, r)
Q1c. (5 marks)
By subtracting between your derived short-run cost and long-run cost, show that
the long-run cost is always lower than the short-run cost for any given level of q,
regardless of the level of K and r.
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