Problem
Let a firm's production function be z=f(x,y)=xayb
where z is the output level and x and y are factor inputs and a and b are exogenous parameters, a,b>0. Prices on factors are given, px and py and the product price is p.
a) Show that this production function exhibits constant returns to scale if a+b=1, increasing returns if a+b>1 and decreasing returns if a+b<1
b) Derive the cost function for this production function
c) Derive, using the Envelope Theorem, the Shephard's Lemma for this production function.
Explain, and show workings, thank you.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.