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Problem 3: A firm has the following production function: ?(?, ?) = √?√?. A) Show whether...

Problem 3: A firm has the following production function: ?(?, ?) = √?√?.

A) Show whether this firm’s technology exhibits constant, increasing, or decreasing returns to scale.

B) What is the firm’s Technical Rate of Substitution?

C) What is the optimality condition that determines the firm’s optimal level of inputs?

D) Is the marginal product of input ? increasing, constant, or decreasing in ??

E) Suppose the firm wants to produce exactly ? units and that input ? costs $?? per unit and input ? costs $?? per unit. What are the firm’s conditional input demand functions?

F) Using the information from part E), write down the firm’s total cost function as a function of ?? , ??, and ?.

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Expert Solution

Rahul Sunny answered 2 years ago
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