Toy stores and other companies start ordering their toys for Christmas in early summer so that they can ensure their toys can be produced and stocked in time for the Christmas buying season. Santa was sitting around on the beach one day in May enjoying a vacation before he got back to work when he got a Zoom call from the COO of Two Elves Christmas Toys, the sole supplier of toys to Santa. The COO (who happens to be his favourite elve's second cousin twice removed) told Santa that TECT is experiencing significant diseconomies of scale at its current production level.

The company's economist, Hermey (who moonlights as the company's dentist), has estimated the production function as: = ^0.31 ^0.42

A. (5 points) Is Hermey's production function qualitatively correct? Explain.

B. (25 points) If the rental rate of capital is $40/hour and the wage rate is $20/hour, what are the cost minimizing quantities of K and L if TECT needs to produce 1000 toys per hour?