2. Assume that a firm has the following production function; q = L0.5K0.5. Its capital is fixed at K = 1. It faces a rental rate of r = $90 and a wage rate of W = $10. d. Determine the average, average variable, and average fixed cost functions. e. Determine the marginal cost function. f. Calculate the lowest cost, and associated quantity, that the firm can produce this good for in the short run. J

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Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.