Calculate the cost function

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Problem: Consider the following production function f(K, L) = 2K + 3L. Suppose w is the wage paid for each unit of labor, and r is the capital return.

a) What kind of returns to scale has this production function?

b) Solve the cost minimization problem when w = 1 and r = 3.

c) What if now w = 3 and r = 1? Solve it.

d) Draw a picture with both cases. Explain the situation in your picture.

e) Calculate the cost function.

f) What type of scale economies does it have?

Reference no: EM132136773

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