Question

Production of bikes requires 6 workers for every 2 machines, such that bikes are produced according to:

F(K,L)=min(6K,2L)

1) Setup the short run cost minimization problem when K=3

2) Solve for short run optimal amount of labor Lsr(q) and short run minimized cost Csr(w,r,q)

3) Now suppose the bike shop can freely choose capital (K) and labor (L). Set up long run cost minimization problem

4) Solve for the long run optimal amount of capital K*(w,r,q) and labor L*(w,r,q), and the long run minimized cost C*(w,r,q)