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1/3 1/3 2. Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(1.2), where out- put is measured in gallons, z, is the number of pounds of lemons he uses, and 22 is the number of labor-hours spent squeezing them. (a) Does Earl have constant returns to scale, decreasing returns to scale, or increasing returns to scale? (b) Let wy be the cost of a pound of lemons and up the wage rate for lemon-squeezers. What is the cheapest way for Earl to produce lemonade? (e) If he is going to produce y units in the cheapest way possible, what is the number of pounds of lemons he will use? What is the number of hours of labor he will use? Write down the cost function. (d) As y increases, will the cost of production increase by more than proportional or less than proportional?

1/3 1/3 2. Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(1.2), where out- put is measured in gallons, z, is the number of pounds of lemons he uses, and 22 is the number of labor-hours spent squeezing them. (a) Does Earl have constant returns to scale, decreasing returns to scale, or increasing returns to scale? (b) Let wy be the cost of a pound of lemons and up the wage rate for lemon-squeezers. What is the cheapest way for Earl to produce lemonade? (e) If he is going to produce y units in the cheapest way possible, what is the number of pounds of lemons he will use? What is the number of hours of labor he will use? Write down the cost function. (d) As y increases, will the cost of production increase by more than proportional or less than proportional?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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2. Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(1,2)=, where out- 1/3 1/3 put is measured in gallons, 21 is the number of pounds of lemons he uses, and 22 is the number of labor-hours spent squeezing them. (a) Does Earl have constant returns to scale, decreasing returns to scale, or increasing returns to scale? (b) Let wi be the cost of a pound of lemons and we the wage rate for lemon-squeezers. What is the cheapest way for Earl to produce lemonade? (e) If he is going to produce y units in the cheapest way possible, what is the number of pounds of lemons he will use? What is the number of hours of labor he will use? Write down the cost function. (d) As y increases, will the cost of production increase by more than proportional or less than proportional?
Transcribed Image Text:2. Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(1,2)=, where out- 1/3 1/3 put is measured in gallons, 21 is the number of pounds of lemons he uses, and 22 is the number of labor-hours spent squeezing them. (a) Does Earl have constant returns to scale, decreasing returns to scale, or increasing returns to scale? (b) Let wi be the cost of a pound of lemons and we the wage rate for lemon-squeezers. What is the cheapest way for Earl to produce lemonade? (e) If he is going to produce y units in the cheapest way possible, what is the number of pounds of lemons he will use? What is the number of hours of labor he will use? Write down the cost function. (d) As y increases, will the cost of production increase by more than proportional or less than proportional?
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