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