Question

    Suppose that a firm has the cost function for a plant as given below

    C(w, r, q) = 0.5q(w+r)

    where q is output, w is the cost of labour l and r is the cost of capital k. 

    Find out the production function for the firm

    A Q = 0.5L0.5K0.5 Correct Answer Incorrect Answer
    B Q = 2L+2K Correct Answer Incorrect Answer
    C Q = min(2L,2K) Correct Answer Incorrect Answer
    D Q = L + 0.5K Correct Answer Incorrect Answer

    Solution

    When expenditure (cost) function is given and we need to calculate production function. Then use Shepherd’s Lemma.

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