Cost minimization for cobb-douglas

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Reference no: EM13771174

Cost Minimization for Cobb-Douglas. Suppose the Acme Gumball Company has the production function of q=LK. Given that the MPL=K, MPK=L and MRT S=MPL/MPK.

Part a-b, we are analyzing the impact of output on input choices.

a. Suppose wage rate is w= $5 and rental rate is r= $5. What is the cost-minimizing combination of L and K to produce 100 gumballs? How much is the cost?

b. Given the same wage and rental rate as part a. What is the cost-minimizing combination of L and K to produce 200 gumballs? How much is the cost?

c. The production function for Acme Gumball Company exhibits _________ (increasing, constant, or decreasing) return to scale. The total cost increases _________ (faster than, slower, than, or at the same rate as) the output increases.

Reference no: EM13771174

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