1) Referring to the diagram, answer the following question. Assume that the manager has 3000 units of capital in the short run. Assume that price of L is 100 per unit and of K is 500 per unit.
a) For input combination “A”, MPK/r is _______ than MPL/w. Explain.
b) Why is the short run expansion path horizontal at K = 3000?
c) What is the short run average cost of producing 20,000 units?
d) What is the long run average cost of producing 20,000 units?
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