Hannah and Sam run Moretown Makeovers, a home remodeling business. The number of square feet they can remodel in a week is described by the Cobb-Douglas production function
Q=F (L,K)
Q=10L0.5K0.5
where L is their number of workers andKis units of capital. The wage rate is $100 per week and a unit of capital costs $2,500 per week. Suppose that when initially producing 100 square feet a week, they use 2 units of capital.
a. What is their short-run cost of remodeling 200 square feet per week?
b. What is their long-run cost of remodeling 200 square feet per week?