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Exercise: A firm produces output according to the following production function: q = A K1/4L1/4 The price of capital is labeled r and the price

Exercise:A firm produces output according to the following production function:

q=A K1/4L1/4

The price of capital is labeledrand the price of labor is labeledwand there is a set-up cost labeledF.Solve the cost minimization problem and do the following:

IfA = 6, r = 4, w = 9, F = 108and the firm wants to produce q = 36, Determine this firm's average cost AC*.

A. 15 B. 20 C. 10 D. 122

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