#### Description

##### Apu's Squishy production function...

**Description**

New solution updates

**Question**

Assignment (Max. Marks 60)

Due Date: November 24th

ESSAY. Write your answer on a separate sheet of paper.

1) 20 Points

Apu's Squishy production function is y(K, L) = K L where K is the number of squishy machines and L is the

number of labor hours he employs. Does this production function exhibit increasing, decreasing or constant

returns to scale? (5 Points) At the moment, Apu uses 2 squishy machines and 4 labor hours. Suppose that Apu

can use any amount of either input without affecting the market costs of the inputs. If Apu increased his use of

labor hours and squishy machines by 100%, how much would his production increase? (5 Points) Increasing

the use of both inputs by 100% will result in Apu's costs increasing by exactly 100%. If Apu increases his use of

all inputs by 100%, what will increase more his production or his costs? (5 Points) Given that Apu can sell as

many squishies as he produces for $1.00, do his profits go up or down when he increases his input use by

100%?(5 Points)

2) (20 Points)

May enjoys spending her free time with her friends at the mall and solving problems from her microeconomics

3 P 1/4

text. She has 16 hours per week of free time. Diagram May's time constraint. (5 Points) If MUF =

and

4 F

1 F 3/4

MUP =

where F is her time spent with friends at the mall and P is her time spent working problems

4 P

how much time should May spend at each activity? (15 Points)

3) (20 Points)

The demand curves for steak, eggs, and hot dogs are given in the table below. The current price of steak is $5.

The price of eggs is $2.50, and the price of hot dogs is $0.75. Fill in the remaining columns of the table using this

information. Indicate which goods are substitutes and which goods are complements.

Good

Demand Equation

Steak

1

DS = 500 - 2PS P + PH

10 E

Egg

Steak Price

Elasticity of

Demand

1

DE = 75 - 3PE - PS +

P

10 H

Hotdog

DH = 300 -

1

1

P + PS +

P

2 H

10 E

1

Egg Price

Elasticity of

Demand

Hotdog Price

Elasticity of

Demand

Solution ID:351099 | This paper was updated on 26-Nov-2015

Price :*$40*