A firm's production function is given by q = min{M, L¹2}, where M is the number of machines and L is the amount of labor that it uses. The price of labor is $1and the price of machines is $2 per unit. e a. Derive the firm's long-run average cost. b. Is this technology decreasing return to scale? Show your argument.< C. Is it true the statement that if average production cost is increasing, a firm's technology exhibits the decreasing return to scale. (If yes, show the proof. If not, show a counter example) d. Is it true that if a firm's technology exhibits the decreasing return to scale, then average production cost is increasing? (If yes, show the proof. If not, show a counter example)
