Question: Let the long-run total cost function be LTC = (1/12) Qw 0.5 r 0.5. a. Demonstrate that a doubling of input prices causes LTC to

Let the long-run total cost function be LTC = (1/12) Qw 0.5 r 0.5.

a. Demonstrate that a doubling of input prices causes LTC to double.

b. Find the elasticity of total cost. This long-run total cost function is characterized by ___________ scale.

c. Let w = $16 and r = $25, and find LMC and LAC. Graph the LMC and LAC curves. Are these curves consistent with part b?

d. Is your answer to part b consistent with your answer to part d in Mathematical Exercise 4 in Chapter 9?


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a Yes because the exponents on w and r sum to one Thus LTC Q 2 w 2 r 112 Q 2 w 05 ... View full answer

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