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A 10 percent increase in w or 10 percent increase in r

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The cost of a person-hour of labour is w and the cost of a machine-hour of capital is r. The firm's longrun total cost equation is TC(Q) =w 1/2 r 4/5 . Given this information, which change would cause the greater upward rotation in the long-run total cost curve: a 10 percent increase in w or a 10 percent increase in r? Based on your answer, is the firm's production operation more capital intensive or labour intensive? Explain.

Reference no: EM13456061

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