Question

To produce cake (Q), you need vegetable oil (V) and premixed ingredients (I). Each cake needs exactly 1?2 cup of vegetable oil and one package of ingredients. If you add more than 1?2 cup of vegetable oil, you still produce only one cake. Similarly, when you add two packages of ingredients to 1?2 cup of vegetable oil, you still produce only one cake.

Write down the production function that describes the technology of cake production.

Determine and explain returns to scale for this production function.

A salmonella scare has caused a vegetable oil shortage. For the short-run, you are stuck with only 4 cups of vegetable oil. On 3 separate graphs, draw your total product, average product, and marginal product of ingredients curves.

Answer 1