Suppose a firm's production function has the Cobb-Douglas form
q = z1a1z2a2
Where z1 and z2 are inputs, q is output anda1,a2 are positive parameters.
1. Draw the isoquants. Do they touch the axes?
2. What is the elasticity of substitution in this case?
3. Using the LaGrange an method find the cost-minimizing values of the inputs and the cost function.
4. Under what circumstances will the production function exhibit (a) decreasing (b) constant (c) increasing returns to scale? Explain this using first the production function and then the cost function.