Find the long run cost functions ltc-lac and lmc

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Reference no: EM13241400

The production function is Q = ALaKb, where a > 0 and b > 0.

a. The marginal product of labor is MPL =

b. The marginal product of capital is MPK =

c The marginal rate of technical substitution is MRTS =

d. Show that the isoquants for this production function are convex. [hint: Show that MRTS diminshes as L increase. Why?]

For the production function above let the price of labor be w and the price of capital be r.

a. the efficient usage function for labor is L* =

b. The efficient usage function for capital is K* =

c. Find the long run cost functions. LTC, LAC, and LMC

d. Show that both LAC and LMC increase at any Q when either w or r increase.

Reference no: EM13241400

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