Neoclassical Production and Costs

Assume the following production function: y = 2x₁^.5 + 3x₂^.5

a. Suppose x₂ = 16, derive the marginal product schedule for x₁. In which direction is it moving?

b. What returns to scale does the production function show?

c. Consider p₁ = $4.00, p₂ = $2.00, and x₂ = 16; for the specified values of y find out average fixed costs, average total costs, average variable costs, and marginal costs:

y x₂ x₁ AFC AVC ATC MC

12 16

13 16

14 16

15 16

16 16

17 16

18 16

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