Question: Question 2 (Cost Minimization). Suppose a producer's production function is f(x 1 , x 2 ) = 5x 1 x 2 or alternatively f(L, K)

Question 2 (Cost Minimization). Suppose a producer's production function is f(x₁, x₂) = 5x₁x₂ or alternatively f(L, K) = 5L*K. The price of x₁ is 20 and the price of x₂ is 80. The firm wants to produce 80 units.

a) What is the least costly way for the firm to produce 80 units?

b) Suppose the firm has committed itself to 4 units of capital (short run scenario). What combination of inputs is the least costly way for it to produce 80 units now?

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