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21.4 (0) Earl sells lemonade in a competitive market on a busy street cm'uer in Philadelphia. His production function is f(':i:1,a:2) Jr: mimmyl', where output
21.4 (0) Earl sells lemonade in a competitive market on a busy street cm'uer in Philadelphia. His production function is f(':i:1,a:2) Jr: mimmyl', where output is measured in gallons, 9:1 is the number of pounds of lemons he uses, and 3:2 is the number of labor-hours Spent squeezing them. (0.) Does Earl have constant returns to scale, decreasing returns to scale, or in creasing returns to scale? [:I. (6) Where ml is the cost of a pound of lemons and tug is the wage rate for lemon-sq ueezers, the cheapest way for Earl to produce lemonade is to use l:|hours of labor per pound of lemons. (Hint: Set the slope of his isoquant equal to the slope of his isocost line.) (c) If he is going to produce y units in the cheapest way possible, then the number of pounds of lemons he will use is 3:1(w1,wg.y) = and the number of hours of labor that he will use . (Hint: Use the production func- tion and the equation you found in the last part of the answer to solve for Lhe input quantities.) (d) The cost to Earl of producing 19 units at, Factor prices wt and 11);), is C(w1,w2'y)= wlmdwuwzryl +w2$2[101.102,yl = _
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