Y7

Quiz 7.3; In example 7.I we derived the equation for the long-run cost function, C(w, r, q) = 2w0.570.5q, for the Cobb-Douglas production function q = Lo.5K95. Suppose w = 25 and r = 100, derive the long-run cost curve, the average cost curve and the marginal cost curve. Describe the shapes of these cost curves and does it make sense (Hint: What is the returns to scale of this production function)