Question: Consider a rm with production function (Cobb- Douglas) q=K^(1/2)L^(1/2) Suppose that one unit of capital costs r = 12.5, whereas one unit of labor costs

Consider a rm with production function (Cobb-

Douglas)

q=K^(1/2)L^(1/2)

Suppose that one unit of capital costs r = 12.5, whereas one unit of labor costs w = 8.

(a) Determine the optimal input mix that leads to an output of q = 2.

(b) Determine the rm's cost function, that is, the minimum cost required to

produce output q.

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