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Suppose q is produced using three factors of production, 21, 22, and 23. In the short run, the firm takes 21 as fixed and then
Suppose q is produced using three factors of production, 21, 22, and 23. In the short run, the firm takes 21 as fixed and then chooses 22 and 23 to minimize the cost of producing some given level of output. Under what circumstances will an increase in 21(1) raise short run costs, (2) lower short run costs, or (3) leave short run costs unchanged? That is, if C(wl, w2, w3, 21, q)is a firm's short run cost function, what determines the sign of 60621? Give an intuitive explanation of your results(H|NT: Think about the relationship between the price ratio and the M RTS)
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