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1) A firm has carefully estimated its production function to be: Q = K0

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1) A firm has carefully estimated its production function to be: Q = K0.4L 0.6 , where Q = units of output, K = units of capital, and L = units of labor. If both capital and labor were increases by 10%, how much would output increase (in percentage terms)? What sort of returns to scale does the firm face? Explain.

2) Three college students consider the option of forming a lawn care and landscaping business during their summer vacation. They estimate the following costs:Insurance $2,600, Equipment Rental Fees $1,000, Fuel and Supplies $4 per lawn ,Miscellaneous Expenses $2 per lawn. Their projected revenue depends on the number of lawns serviced. The price per job is $30. The going wage for a typical unskilled college student is about $2,400 for the summer. Derive equations for total accounting profit and total economic profit. Should the students launch the business if they expect to service about 200 lawn jobs during the summer?

3)A firm's average cost (AC) is described by the equation: AC = 2,000/Q + 60 + 0.2Q.

(a) Determine the equation for the firm's marginal cost (MC). What is the MC of producing the tenth unit of output?

(b)Compute the level of output that minimizes average total cost (AC)?