939 said:I am completely lost...
Production function: Q = L + K
Given a hint that there are three answers, depending on the slope of the isocost line...
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A production function is a mathematical representation of the relationship between the inputs and outputs of a production process. It shows how much output can be produced from a given combination of inputs, such as labor and capital.
The long-run cost function can be found by taking the derivative of the production function with respect to each input, and then solving for the inputs in terms of the output. This will give you the long-run cost function, which shows the minimum cost of producing a given level of output.
The short-run cost function takes into account fixed inputs, such as capital, that cannot be changed in the short run. The long-run cost function, on the other hand, assumes that all inputs can be adjusted in the long run. Therefore, the long-run cost function shows the true cost of producing a given level of output.
The long-run cost function is used to help businesses make decisions about their production processes. It can help them determine the most cost-effective combination of inputs to produce a certain level of output, and can also be used to evaluate the cost of expanding or reducing production.
One limitation of the long-run cost function is that it assumes that all inputs are perfectly substitutable, meaning that one input can be easily replaced with another without affecting the output. This may not always be the case in real-world production processes.