Question: A film studio in Hollywood produces movies according to the function
q = F(K;L) = (2=100)K^0.5L^0.5
In the short run, capital (studios, gear) is xed at a level of 100. It costs $40 (in thousands) to rent a unit of capital and $10 (in thousands) to hire a unit of labor (actors, stuntmen, camera crew etc.).
What is the fixed cost? What is the variable cost as a function of output q?