The production function of a business is Q=L0,25K0,25. The initial prices of inputs are w=1 and r=1 for the labor and capital respectively. Suppose that initially the capital quantity is constant at K=4.

A) Does the law of diminishing returns apply here?

B) Find the short run function of total cost and then the short run functions of marginal and average cost.

Now assume we refer to a time horizon long enough which enables the adaptation of the two inputs.

C) What is the equation of the expansion path?

D) What type of returns to scale characterizes the production technology?