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An electric battery producer can use lithium (L) or a sodium compound (S) to make their batteries. The production function for batteries is: q =

An electric battery producer can use lithium (L) or a sodium compound (S) to make their batteries. The production function for batteries is:

q = 6L + 2S

  1. Show a graph of two isoquants, one where q=120 and one where q=150, including intercepts (put S on the upper axis).
  2. If the price of a unit of lithium is $400 and the price of a unit of sodium compound is $200, what material should the firm use for batteries to produce 120 units?
  3. Are there increasing, constant, or decreasing returns to scale? Explain.

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