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Suppose a firm has a perfectly competitive production function: q=f(K,L)=2(K^1/2)+2(L^1/2). Suppose the price of capital is r and the price of labor is w.

1) The firm's cost minimization problem can be wrtten as:

2) Find the conditional input demand functions:

3) The firm's cost function is:

4) Using the cost function, prove what returns to scale the technology exhibits:

5)Suppose r=1 and w=2 what is the marginal cost function and the average cost function? Also provide a graph to illustrate

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Microeconomics, Economics

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