A firm’s production function is given by q = min{M, L1/2}, where M is the number of machines and L is the amount of labor that it uses. The price of labor is $1and the price of machines is $2 per unit.   a. Is this technology decreasing return to scale? Show your argument. b. Is it true the statement that if average production cost is increasing, a firm’s technology exhibits the decreasing return to scale. (If yes, show the proof. If not, show a counter example) c. Is it true that if a firm’s technology exhibits the decreasing return to scale, then average production cost is increasing? (If yes, show the proof. If not, show a counter example)

Q: Explain how a firm can have constant returns to scale in production and economies of scale in cost.

A: Constant Returns to scale refers to the situation where with the change in the production, the cost…

Q: 1 1 2. Suppose a producer's production function is F(K, L) = 3KZL The cost of K is 20 (r = 20) and…

A: Microeconomic firm theory investigates how companies maximize profit through production, resource…

Q: Skylar owns a firm that produces holiday ornaments. Her production function is given by: f (L, K)…

A: Given- y = (min{x1, 2x2})^1/2 let, We increase X1, X₂ by some constant 'C' y' = ( min { CX₁ + 2 CX ₂…

Q: True or False. Please explain The production function f(x1,x2,x3) = (min{0.5x1;0.75x2 })0.5 ·x30.5…

A:

Q: Question 8 of 13 The following diagram depicts the production function of the farmers, where…

A: Production function:Production is a function of land labor capital and entrepreneurship. It includes…

Q: The gross domestic product (GDP) of the United States is defined as the in a given period of time.…

A: Gross Domestic Product: It refers to the final value of all the goods and services manufactured in…

Q: Which of the following production functions exhibit(s) constant returns to scale? I. Q= KL K+L II. Q…

A: Given:  There are three production functions: 1. Q=KLK+L2. Q=2K+L3. Q=K0.8L0.2

Q: Discuss how the marginal cost declines as the marginal product of a variable input increases. Please…

A: Total revenue is the total value of the commodities produced and sold in equilibrium. Economic costs…

Q: the short run, a firm's average variable cost will increase as its output increases because

A: The variable cost refers to the cost which changes with change in the level of output.  AVC = TVC/Q.

Q: Prunella raises peaches where L is the number of units of labor she uses and T is the number of…

A: Slope of isocost line is the negative price ratio between the two goods.

Q: We often work with production technologies that give rise to initially increasing marginal product…

A: Production technology:True, because the slope of the production frontier is equal to the marginal…

Q: Does this production function exhibit constant returns to scale? Using the marginal products you…

A: To evaluate if the production function displays consistent returns to scale, we must first see if…

Q: Suppose that a firm’s production function is Q =10 K^(3/4)L^(1/4). The cost of a unit of labor is $1…

A: The interplay between the output that a process gives and the various inputs that go in the process…

Q: A firm's production function is characterized by the following production function: Q=L^(1/2)K^(1/4)…

A: Production function:Input price: Wage rate = 1, rent  = 4.Return to scale: "Return to scale" refers…

Q: A firm's production function is given by y(K, L) = 2√(KL) or 2(KL).5 (2 times the square root of the…

A: The Marginal Product of Labor (MPL) represents the change in output resulting from employing an…

Q: Consider the following Cobb-Douglas production function: Y = 10L04K04. Suppose that the price of…

A:

Q: Suppose a pizza parlor has the following production costs: $3.00 in labor per pizza, $4.00 in…

A: Variable cost is the cost that varies with the change in production level. So, the variable cost…

Q: Show using math and logic that for constant returns to scale production functions, MRTS between…

A: Production function and productivity: The production function determines all the input bundles that…

Q: A firm's production function is q = 26x^0.33y^0.67, where x and y are the amounts of factors x and y…

A: 1. Minimize Unit Costs:Unit cost (C) is defined as the total cost of production (Px + Py) divided by…

Q: Iyana's Pizzas is a takeout-only pizza parlor servicing the college campus of Urbana that…

A: The concept of diminishing production also referred to as the law of diminishing returns is an…

Q: If the production function is f(x1,x2) = x1,x2. a. Show whether this production function exhibits…

A: a.  The production function is f(x1,x2) = x1.x2 f(x1,x2) = x1.x2f(λx1,λx2) = λx1 λx2f(λx1,λx2)…

Q: a. A firm's long-run total cost can be written as LTC = 3000Q - 50Q2 + (1/3)Q3 and its long-run…

A:

Q: Suppose that a firm's production function is Q=F(L) = -1L3-30L2 + 5,000L. Its marginal product of…

A:

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.