The cost of labor is $36 per unit and the cost of capital is $9 per unit Represe

Question

The cost of labor is $36 per unit and the cost of capital is $9 per unit Represent graphically the isoquants of y=l, y=2, and y=3. Does this technology exhibit increasing, constant, or decreasing returns to scale? Why? Suppose that capital is fixed at 27 units in the short run. If the firm wants to produce 18units of output, how much labor will a cost minimizing firm use? What would be the firm's total cost? Suppose now that you can vary the amount of capital freely. Find the marginal rate of technical substitution between labor and capital. When you can vary the amount of capital freely, how much labor and capital should the firm use to produce 18 units of output? Derive the conditional factor demands for labor and capital. For your conditional demand, use the cost of labor ($36) and cost of capital ($6) given in the question. (g) Derive the long run cost function.

Explanation / Answer

The cost of labor is $36 per unit and the cost of capital is $9 per unit Represe

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