Production and Costs: Consider the following Cobb-Douglas production function for YumYum Yogurt: Q=(L^0.2)*(K^0.5)
a. Intuitively, why are Cobb-Douglas production functions more appropriate representations of reality than, say, linear production functions?
b. Based on the function above, is YumYum's business experiencing economies or diseconomies of scale? Explain how you arrive at your answer.
c. If YumYum decided to boost Labor by 15% and Capital by 10%, how much will productivity increase?
d. If YumYum wanted to boost productivity by 40% and already knew they were going to increase capital by 20%, how much would they have to increase their labor force to reach this production target?