When the production function is given by Q = L, which of the following statements is true? A) TC = wQ², L = Q² and AC = w B) TC = w - Q, L = Q and AC = w C) TC = wQ, L = Q and AC = w D) TC = wQ, L = Q and AC = L

Question

Quizplus · Accepted Answer

With Q = L, we can derive the cost function as TC = wQ, where w is the wage rate. The corresponding labor demand function would be L = Q. Using these, we can derive the average cost function as AC = TC/Q = wQ/Q = w. Therefore, option C - TC = wQ, L = Q and AC = w - is the correct statement.

When the Production Function Is Given by Q = L