Suppose the production function for a competitive firm is y=f(x1,x2)= x₁2x223. The cost per unit of the first input is w₁ and the cost of the second input is w2. a. What are the returns to scale of this production function? Find the cheapest input bundle, x₁ and x2, that yields the given output level of y. b. Write down the formula of the firm's total costs as a function of y. Are the average costs increasing, constant or decreasing in y? Are the marginal costs increasing, constant or decreasing in y? Why?

Suppose the production function for a competitive firm is y=f(x1,x2)= x₁2x223. The cost per unit of the first input is w₁ and the cost of the second input is w2. a. What are the returns to scale of this production function? Find the cheapest input bundle, x₁ and x2, that yields the given output level of y. b. Write down the formula of the firm's total costs as a function of y. Are the average costs increasing, constant or decreasing in y? Are the marginal costs increasing, constant or decreasing in y? Why?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section12.3: The Various Measures Of Cost

Problem 3QQ

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