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You’re the owner of a factory that produces 1,000 of your product per year and whose...

You’re the owner of a factory that produces 1,000 of your product per year and whose production process is described by the function: Q=1000=2/5(K^0.4)(L^0.8).

You are currently employing the optimal mix of labor and capital. However, you are thinking about further expanding your business by building 2 more identical factories to meet the demand for your product. If capital costs are $30 per unit, labor costs are $15 per unit, and if price of your good is $35, will building 2 more factories be profitable if you know that the arc (midpoint) price elasticity of demand equals -2.5? What would be the marginal costs and marginal benefits of this expansion? Is it a good idea to expand?

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