Herongate Horses produces saddles (y)using two inputs, leather (z₁)and labour (z₂). Herongate Horses' production function is given by: F(z₁, z₂)= (1/4)z₁z₂
i)Does Herongate Horses' production function exhibit constant, increasing, or decreasing returns to scale?
ii)Graph Herongate Horses' isoquant for y = 4. Calculate the slope of the isoquant as a function of z₁and z₂.
iii)Calculate Herongate Horses' conditional input demands for z1 and z2 as a function of y, when w₁= 5 and
w₂= 20.
iv)Using your answer to (iii), find Herongate Horses' total cost function. Graph the total cost function, TC(y). Find and graph the long run average cost function, LAC(y).

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The Answer of Herongate Horses produces saddles (y)using two inputs, leather (z₁)and labour (z₂). Herongate Horses' production function is given by: F(z₁, z₂)= (1/4)z₁z₂ i)Does Herongate Horses' production function exhibit constant, increasing, or decreasing returns to scale? ii)Graph Herongate Horses' isoquant for y = 4. Calculate the slope of the isoquant as a function of z₁and z₂. iii)Calculate Herongate Horses' conditional input demands for z1 and z2 as a function of y, when w₁= 5 and w₂= 20. iv)Using your answer to (iii), find Herongate Horses' total cost function. Graph the total cost function, TC(y). Find and graph the long run average cost function, LAC(y).

Herongate Horses Produces Saddles (Y)using Two Inputs, Leather (Z1)and Labour

Herongate Horses Produces Saddles (Y)using Two Inputs, Leather (Z₁)and Labour