Firm produces shoes using capital and labor. Its production function is ????=????1/2????.

a.What is firm's return to scale and what does it mean economically?

b.Write down the equation of an isoquant of this firm and sketch several isoquants.

c.Determine the marginal products of capital and labor and the marginal rate of technical substitution between capital and labor.

d.What is the condition for an optimal combination (K*, L*) of input factors? Derive this condition for the firm and evaluate it for the case when r = 6 and w = 3. Draw few isocosts on the graph.

e. Determine the cost-minimizing choice of production factors if the firm has to produce ????̅ units of output.

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