Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 25 boats per period. Homer's short-run cost function is: where q is the number of boats produced and K is the number of hydraulic lifts. Homer's long-run cost function is: At Homer's current short-run plant size, calculate Homer's short-run average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his short-run average total cost of producing 25 boats increase or decrease? Does Homer's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Question

Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 25 boats per period. Homer's short-run cost function is:  where q is the number of boats produced and K is the number of hydraulic lifts. Homer's long-run cost function is:  At Homer's current short-run plant size, calculate Homer's short-run average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his short-run average total cost of producing 25 boats increase or decrease? Does Homer's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

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The Answer of Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 25 boats per period. Homer's short-run cost function is:  where q is the number of boats produced and K is the number of hydraulic lifts. Homer's long-run cost function is:  At Homer's current short-run plant size, calculate Homer's short-run average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his short-run average total cost of producing 25 boats increase or decrease? Does Homer's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Homer's Boat Manufacturing Plant Leases 50 Hydraulic Lifts and Produces