Question
Renato runs a cost minimizing firm with production function q = K1/2L1/2. He hires labour for w = 2 and capital for r = 2.
Renato runs a cost minimizing firm with production function q = K1/2L1/2. He hires labour for w = 2 and capital for r = 2. For several years he produced q = 2 units of output. He has recently signed a new contract and will expand output to q = 7. In the short run he will not be able to change capital. In the long run he can change both capital and labour. Be prepared to upload anIsoquant and Isocost Diagram showing his initial production as A, his short-run choice as B and his long-run choice as C.In the short-run Renato's total costs will be equal to SC = ______.
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