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To produce ice cream cones, Marcus requires capital K and Labor L. Neither by itself produces good ice cream cones. Suppose that the production technology can be captured by the production function: q = 20L0.5K0.5, where q is the number of traps , MPL= 10L-0.5K0.5, and MPK = 10L0.5K-0.5.
a. What can you say about the returns to scale for this production function? (already answered)
b. What is the equation of the isoquants?
c. What is the equation for the slope of the isoquant?
d. Set up the cost minimization problem and solve for the conditional capital and labor demands as functions of w (the labor costs), r (the capital costs) and q (number of ice cream cones)
e. What is the equation of the expansion path?
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