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(26pts) A small cleaning company has production function given by f(k,I) = [ min(5k,41) 10.5; it rents its cleaning machines at a price of r
(26pts) A small cleaning company has production function given by f(k,I) = [ min(5k,41) 10.5; it rents its cleaning machines at a price of r = $15 per hour, and pays an hourly wage of $12. In addition, the company's monthly rent is $216 (avoidable in the long run). A. What returns to scale does this function exhibits? (Explain.) (4pts) B. Find the producer's (long-run) cost function. (7pts) C. Calculate the firm's (long-run) supply curve. (7pts) D. Suppose that inefficiencies in the production process mean that when producing quantities strictly above 12, the production function is actually f(k,!) = [ min{3k,41) 10.5 . [It is unchanged for quantities below 12.] Calculate and graph the new (long-run) supply curve of the firm. Make sure your graph is properly labelled, and that relevant numbers are indicated. (8pts) [For 0.5 bonus point, enter below the cost of renting cleaning machines for 3 hours. Enter a numerical value without a dollar sign.]
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