Question

Suppose a firm can use either capital (k) or labor (l) in a production process. the firms production function is given by q = 5l + 15k. the price of capital is $20 per unit and the price of labor is $8 per unit.

a. what is the firm's total cost function?

Answer 1

In this item, let us rewrite the given equation as,

q = 5l + 15k

where q is the cost, k is the capital cost, and l is the production cost. If we are to determine the total cost function, we simply have to multiply the given values or price for capital and labor such that the equation becomes,

q = (5)(8) + (15)(20)