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##### Apu's Squishy production function

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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

Paper#15386 | Written in 18-Jul-2015

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