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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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