Problem
Corner solutions.
(a) A firm produces a good Q with inputs K (capital) and L (labor). The cost of a unit of capital exceeds the wage rate (r > w) and yet the firm uses only capital and no labor. TRUE OR FALSE. It is possible that the firm is cost-minimizing. Explain and draw a graph that illustrates your answer.
(b) The production function for rubber ducks is not given, but we know that it does not violate any axioms. The firm producing rubber ducks wants to make 5 million rubber ducks. The rental rate for capital is $100. TRUE, FALSE, OR UNCERTAIN. When the wage is sufficiently low, the firm will minimize costs by using all labor. Explain and draw a graph that illustrates your answer.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.