Question: please do it in 10 minutes will upvote B1: COSTS and PROFITS with PERFECT-SUBSTITUTES 20 points. (2 points) (a) Suppose we have the following production

please do it in 10 minutes will upvote B1: COSTS and

PROFITS with PERFECT-SUBSTITUTES 20 points. (2 points) (a) Suppose we have the

please do it in 10 minutes will upvote

B1: COSTS and PROFITS with PERFECT-SUBSTITUTES 20 points. (2 points) (a) Suppose we have the following production function: Q=K+10L. Confirm the technology is constant returns to scale (CRS). Show your work and explain what it means. (3 points) (b) Suppose K and L are both variable (eg we are in the long-run). Let r=$100 and w= \$2000. State the firm's cost minimization problem. Show and explain using the isocost - isoquant figure. (2 points) (c) What is the marginal rate of technical substitution (MRTS) in this problem? What does the MRTS mean? Interpret it. (5 points) (d) What do we mean by an exit price? What is the exit price if r=$100 and w=$2000 ? Explain. (4 points) (e) Now suppose wages ( w ) falls. At what value of w will the firm switch from K into L ? Use the isocost - isoquant figure to explain. (4 points) (f) Does a lower w change the exit-price? If so, how? Explain

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