4. Suppose that the price per unit of input K is 1 euro, theprice per unit of input C is 12 euros and the price per unit ofinput L is 3 euros a) What is the minimum cost of producing 40units of output y for the firm if the firm’s production function isY =min {K;4C}+ L/2 ?
The Government is planning a policy, which envisagessimultaneously the following two policies: 1)
introduction of a tax of 1 euro per unit of input L, and 2)introduction of a subsidy of 2 euros per unit of
input C. Find and explain briefly, how would the planned policyaffect this firm. Would it affect the
minimum cost of production of 40 units of output? Would itaffect the technology used? Provide
calculations for proof.
