Suppose that the production function for Girl Scout cookies is given by Q(K, L) = K 1 2L 1 2 The...

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Suppose that the production function for Girl Scout cookies is given by Q(K, L) = K 1 2L 1 2 The workers who make Girl Scout cookies are paid a wage of $5 per hour and a unit of capital can be rented for $10 per hour. (a) (4 points) In the short run, this troop’s capital is fixed at K=9. Find the firm’s short run total cost function, SRT C(Q). (b) (5 points) Suppose that capital is now fully flexible. Find the long run total cost function, LRT C(Q). (c) (3 points) For what level of Q is the long run cost function equal to the short run cost function? (Hint: You should determine the solution without doing the obvious method, which involves solving a difficult quadratic equation.)

Robert · Accepted Answer

Suppose that the production function for Girl Scout cookies is given by Q(K, L) = K 1 2L 1 2 The workers who make Girl Scout cookies are paid a wage of $5 per hour and a unit of capital can be rented for $10 per hour. 
(a) (4 points) In the short run, this troop’s capital is fixed at K=9. Find the firm’s short run total cost function, SRT C(Q). 
(b) (5 points) Suppose that capital is now fully flexible.

Suppose that the production function for Girl Scout cookies is given by Q(K, L) = K 1 2L 1 2 The workers who make Girl Scout cookies are paid a wage of $5 per hour and a unit of capital can be rented...

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