1a) A study published in Social Science Medicine, "Production Functions for General Hospitals," estimated the following general hospital production function: Q = 5*Staff^.34*Beds^.64*Drugs^.04*Specialists^.02, where Q is a measure used by the authors for patient care. Hospital Management has set a target of Q = 50. Suppose input prices are Pstaff = 12, Pbeds = 5, Pdrugs = 15, Pspecialists = 30. Use Excel Solver to find the following: How many Staff and Specialists should Hospital Management employ to produce Q = 100 and minimize cost of production for that output?

	A.	8.293; .195.
	B.	5.59; .082.
	C.	9.654; 5.672.
	D.	.20.453; 2.136.
	E.	18.751; 3.468.

b) Marc Nerlove conducted a classic study on economies of scale in the electric utility industry. I took his data and estimated a cost function for electric utilities. The estimated total cost function I obtainedis: TC = .03*Q^.72*PL^.44*PF^.43*PK^-.22. Based on these results, you can conclude that these firms are experiencing:

	A.	Economies of Scale.
	B.	Constant Economies of Scale.
	C.	Diseconomies of Scale.

D. None of the above