Question: Suppose that the weekly production function takes the form X = 2L + K, with the firm facing a weekly wage rate of £100 and capital rentals of £300.
(a) Will the firm use any labour at all in the production process?
(b) Suppose that output of X is 500 units per week. What are marginal costs? What are average costs?
(c) Suppose that the wage rate increases by 60 per cent. What happens to the cost of production? What happens to average and marginal cost?