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Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(x1; x2) = x1^1/3x2^1/3 where output is
Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(x1; x2) = x1^1/3x2^1/3 where output is measured in gallons, x1 is the number of pounds of lemons he uses, and x2 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) What is the Long run cost minimization condition?
(b) Given that w1= 4, w2=9, what are cost minimizing levels of x1 and x2 in order to produce 10 units of output?
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