Question

1. Consider a candy company that produces its specialty, Almond Yummies, with two inputs, chocolate and...

1. Consider a candy company that produces its specialty, Almond Yummies, with two inputs, chocolate and almonds. The recipe requires that exactly 1 almond and 1 ounce of chocolate be used for each Almond Yummy - no more, and no less.

(a) What is the production function for this candy company? Illustrate a typical isoquant for this production function.

(b) Does this production function exhibit increasing, decreasing, or constant returns to scale?

(c) If the firm wanted to produce 10 Almond Yummies, how many ounces of chocolate would it need? How many almonds would it need?

(d) If the firm faces factor prices (1, 1), what is the cheapest way for it to produce 10 Almond Yummies? How much will this cost?

(e) If the firm faces factor prices , what is the cheapest cost to produce 10 Almond Yummies? (f) If the firm faces factor prices , what will be the minimal cost of producing y Almond Yummies?

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