What is earl cost function and cost minimization problem

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Reference no: EM131107970

Earl sells lemonade in a competitive market on a busy street corner in Philadelphia. His production function is f(x1, x2) = x1^1/3 x2^1/3, 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.

(i) Does Earl have constant, decreasing, or increasing returns to scale?

(ii) Let w1 and w2 denote the cost of a pound of lemon and the wage rate for lemon squeezers, respectively. Write down Earl’s cost minimization problem.

(iii) Solve Earl’s cost minimization problem.

(iv) What is Earl’s cost function?

Reference no: EM131107970

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