For a production process that involves two inputs, capital and labor, the constant elasticity long-run total cost function defined in linear relationship using logarithms is
A) log TC = log a + b log Q + c log w + d log r
B) log T = log t + c log Q + a log w + b log r
C) T = log t + c log Q + a log w + b log r
D) T = t + cQ + aw + br

Question

Quizplus · Accepted Answer

The constant elasticity long-run total cost function is typically expressed in logarithmic form as shown in answer choice A. It includes the logarithms of the inputs (labor and capital) as well as the logarithm of the output (total cost) and constants (a, b, c, and d) that represent the relationship between the inputs and output. This function allows for analysis of the elasticities of substitution between the inputs and other cost-related issues in production. Answer choices B, C, and D do not accurately reflect this function.

For a Production Process That Involves Two Inputs, Capital and Labor