Question

If a Cobb-Douglas production function is given as f(k, l) = k^0.5 * l^0.5, and input prices are represented by v = 2 and w = 8, what is the relevance of these values, and what question is addressed regarding average cost?

Answer 1

The Cobb-Douglas production function represents the relationship between input quantities and output. The input prices v and w are used to calculate the average cost of production.

Step-by-step explanation:

The Cobb-Douglas production function, given as f(k, l) = k^0.5 * l^0.5, represents the relationship between the input quantities of capital (k) and labor (l) and the output of a production process. The values v = 2 and w = 8 represent the input prices for capital and labor, respectively. These values are used to calculate the average cost of production, which is a measure of the cost per unit of output produced.

To determine the average cost, we need to divide the total cost by the total output produced. The total cost can be calculated by multiplying the input prices by the respective input quantities. In this case, considering the Cobb-Douglas production function, the average cost can be expressed as AC = (v*k + w*l) / (k^0.5 * l^0.5). By plugging in the given input prices and the corresponding input quantities from the table, we can calculate the average cost for each level of output.