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Q 4 . If the wage rate is 1 0 per hour and the cost of capital is 2 0 per unit: firm has the
Q If the wage rate is per hour and the cost of capital is per unit: firm has
the following production function for its main product:
where Q output millions units labour input hours and K capital input
units
a Find the combination of labour and capital that minimises the cost of
producing units of output. What is the total cost of producing this level
of output?
marks
b If the both inputs are doubled, find the costminimising level of output and
the associated costs. What can be said about returns to scale? Comment
on the implications for the firm.
c Is each input subject to diminishing returns? Explain.
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