A firm has a production function of Q = KL + L, where MP_L = K + 1 and MP_K = L. The
Wage rate (W) is $100 per worker and the rental (R) is $100 per unit of capital. In the short run, capital (K) is fixed at 4 and the firm produces 100 units of output. The firm's short-run total cost of producing 100 units of output is $____.

Question

Quizplus · Accepted Answer

In the short run, K is fixed at 4. The production function is Q = KL + L. For Q = 100, 4L + L = 100, so L = 20. The cost is W*L + R*K = 100*20 + 100*4 = 2,400.

A Firm Has a Production Function of Q = KL