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Suppose a firm has two different methods of production using the same capital (i.e. same machines). Method 1 will produce using a CES production function:
Suppose a firm has two different methods of production using the same capital (i.e. same machines). Method 1 will produce using a CES production function: q=h(K,L)=(K+L)2 Method 2 will produce using a Cobb-Douglas production function: q=g(K,L)=4KL Unless specified otherwise, assume P=$10,w=$20, and r=$5 for the remainder of the question. Use the information about to answer the following questions: What is the short run cost function using h(K,L) ? What about using g(K, L) ? Show the optimal q for both. Suppose a firm has two different methods of production using the same capital (i.e. same machines). Method 1 will produce using a CES production function: q=h(K,L)=(K+L)2 Method 2 will produce using a Cobb-Douglas production function: q=g(K,L)=4KL Unless specified otherwise, assume P=$10,w=$20, and r=$5 for the remainder of the question. Use the information about to answer the following questions: What is the short run cost function using h(K,L) ? What about using g(K, L) ? Show the optimal q for both
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