1. Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of gasoline. They estimated that in mass production the car would cost $40,000 per unit to build. The engineers argued that Congress should force U.S. automakers to build this energy-efficient car. In your opinion, is energy efficiency the same thing as economic efficiency? Please explain your opinion and state whether you support it or not.
2. Assume that a firm’s long-run average total cost (ATC) is constant. Which of the following functions, where Q is output; L is labor input; K is capital input, is more likely to represent the firm’s production? Please explain your choice.
• Q = f(L,K) = L + K
• Q = f(L,K) = L*K
• Q = f(L,K) = L2 + K2