Cost functions
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A firm has the cost function
C = (3Wk + 5Wl) (q^2 + q)
(a) Check that linear homogeneity in input prices is satisfied.
(b) Suppose Wk = 2 and Wl = 1 . Compute, and roughly graph, the firmâ??s average and marginal cost functions.
(c) What is the standard relationship between the marginal cost function and the average cost function? Is that expectation fulfilled here?
(d) Does this firm operate under decreasing, constant, or increasing returns to scale? Why?
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3) The standard relationship between the marginal cost function and the average cost function states that, at constant ...
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