A public relations firm is retained to 'cover the media' for a client. There is something peculiar about to being paid to chat with other people.
a) When the p.r. Firm doubles its capital it quadruples its workforce. It's production function is given by F (K,L)= min [K^2,L]. If it pays workers a wage of 1 and the rental price of capital is 9, find the cost of pricing 100 units, assuming no fixed costs.
b) Now let's model the drop in the cost of media associated with the Internet as a drop in the cost of capital to 1. What is the new cost of producing 100 units?