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Question: consider a firm whose production is given by qk l...

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Consider a firm whose production is given by Q(K, L) = K^1/2 L^1/2, where K and L are the quantities of capital and labour production inputs. Prices of capital and labour are both $2 per unit.

(a) Suppose that, in the short run, capital is fixed at 4 units. What would be the minimum cost of producing 20 units of output? Illustrate your answer.

(b) Now suppose that, in the long run, both capital and labour are variable. What would be the minimum cost of producing 20 units of output? Illustrate your answer. Explain why your answer here is different from your answer in part (a).

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