Suppose we have a linear production function F(L,K)=5L+2K. The prices of labor and capital are w=2...

 

Transcribed Image Text:

Suppose we have a linear production function F(L,K)=5L+2K. The prices of labor and capital are w=2 and r=10. a. Prove that this production function exhibits the constant return to scale. b. Find the long-run cost function of the firm. c. If price of capital drops to 4, what would be the long-run cost function. Suppose we have a linear production function F(L,K)=5L+2K. The prices of labor and capital are w=2 and r=10. a. Prove that this production function exhibits the constant return to scale. b. Find the long-run cost function of the firm. c. If price of capital drops to 4, what would be the long-run cost function.

Answer rating: 100% (QA)

Given the production function FL K 5L 2K and the respective labor and capital prices w 2 and r 10 lets perform the calculations a Constant Returns to ... View the full answer