Question: A firm has a Cobb Douglas production function q
A firm has a Cobb- Douglas production function, q = ALaKß, where a + ß < 1. On the basis of this information, what properties does its cost function have? For example, a U. S. chemical firm has a production function of q = 10L0.32 K0.56 (based on Hsieh, 1995). If it faces factor prices of w = 10 and r = 20 and its capital is fixed at K = 100, what are its short-run cost, variable cost, average variable cost, and marginal variable cost functions? Plot these curves.
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