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?
Chapter22: Supply: The Costs Of Doing Business
Section: Chapter Questions
Problem 11E
Related questions
Question
100%
Please answer all parts get like please
Hand written not allowed.
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?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 6 steps with 8 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning