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Nancy has a production function f(x sub1) (x sub2)=x sub1+4xsub2. The price of the first input (xsub1) is $12 and the price of the second input, (xsub2), is $8.
a) Does this production function exhibit increasing, decreasing, or constant returns to scale? Explain.
b) How many units of x1 and x2 will Nancy use to produce 30 units of output in the cheapest way? How much will it cost her?
c) What is the cost function associated with producing y units of output?
d) Assume now that input prices are (w1,w2). What is the cost function associated with producing y units of output?
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