2. a) (2) For the following firm production function, indicate whether the production function exhibits decreasing, constant, or increasing returns to scale. yi is the firm i's output, ki is the firm's capital input, and li is the firm's labor input.
yi = (ki + li)
0.5.
b) (2) Draw the firm's isoquant for yi = 1 and yi = 2. c) (2) Where both the wage rate and the cost of capital have values equal to 1, give the firm's cost function.
3. (4) Consider the following firm production function
yi = Y0.05
(ki + li),
where Y is the output of the industry in the city where the firm is located.
a) (2) Draw "qualitatively" the firm's average and marginal cost curves, and indicate the effect on them of an increase in Y.
b) (2) Draw "qualitatively" the average and marginal cost curves of the industry in the city where the firm is located.