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(Cost function) To produce output, rms use two types of labor, skilled labor, s, and unskilled labor, u. Assume that the production function is f
(Cost function) To produce output, rms use two types of labor, skilled labor, s, and unskilled labor, u. Assume that the production function is f (s; u) = min f (u) s; ug ; where (u) > 0 and 0 (u) 0, and the term (u) represents the number of unskilled workers that every skilled worker can monitor. Wages of skilled and unskilled workers are ws and wu, respectively (both of which are strictly positive). (a) Starting from any given combination of inputs, what happens if we double both inputs? (b) Sketch a map of the isoquants corresponding to this technology. (c) Suppose the rm must produce q > 0 units of output. Derive the cost function of this technology as a function of q. (d) The cost function above can be interpreted as the value of total wages paid as a function of production q. What happens with the average wage per worker as q increases
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