A5 Course: Microeconomics - Cost and Production A firm produces shoes using L (labor) and machines (K). Its production function is Q = K1/3 L2/3. Assuming K fixed at 8, price of capital (r) is $4 and...

A5

Course: Microeconomics - Cost and Production

A firm produces shoes using L (labor) and machines (K). Its production function is Q = K1/3 L2/3.

Assuming K fixed at 8, price of capital (r) is $4 and wage(w) is $2, find and plot the short-run cost curves.

Also show that CMeT (AMC) reaches its value at the level of production where it equals Marginal Cost (MC). And show that CMeT (AMC) is ALWAYS decreasing at the beginning due to fixed cost.

Demonstrations should use the necessary calculations.