Question 2 (28 points): Production and Costs A company called EasySoft operates in the software industry. The software production function is given by q=K41L41, where K indicates the number of machines and L is the labor used. Capital and labor can be acquired in competitive markets at unit cost v and w, respectively. (a) (7 points) Sketch two representative isoquants for this production function. Analyze the elasticity of substitution between capital and labor. Would the elasticity of substitution for this technology be higher or lower compared to that of the production technology given by q=min{K,L} ? (b) (7 points) Analye the production function q=K41L41. Solve the cost-minimization problem. Derive contingent demands for labor and capital as functions of costs of labor and capital and target level of output. Derive the total cost function C(v,w,q). (c) (7 points) Now assume that the target level of output is 2, w=4 and v=1. Fllustrate the solution of the cost-minimization problem in the (L,K)-diagram. Clearly indicate the isoquant and the relevant level curve of the cost function. (d) (7 points) Describe at least two main properties of cost functions. Do they hold for the cost function derived in (b). Explain your conchusions. Question 2 (28 points): Production and Costs A company called EasySoft operates in the software industry. The software production function is given by q=K41L41, where K indicates the number of machines and L is the labor used. Capital and labor can be acquired in competitive markets at unit cost v and w, respectively. (a) (7 points) Sketch two representative isoquants for this production function. Analyze the elasticity of substitution between capital and labor. Would the elasticity of substitution for this technology be higher or lower compared to that of the production technology given by q=min{K,L} ? (b) (7 points) Analye the production function q=K41L41. Solve the cost-minimization problem. Derive contingent demands for labor and capital as functions of costs of labor and capital and target level of output. Derive the total cost function C(v,w,q). (c) (7 points) Now assume that the target level of output is 2, w=4 and v=1. Fllustrate the solution of the cost-minimization problem in the (L,K)-diagram. Clearly indicate the isoquant and the relevant level curve of the cost function. (d) (7 points) Describe at least two main properties of cost functions. Do they hold for the cost function derived in (b). Explain your conchusions