PLE collects a variety of data from special studies, many of which are related to the quality of its products.
October 4, 2020
Economics Case Analysis
October 4, 2020
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Jim Corp. produces lecture slides y using two inputs, coffee (x1, measured in cups) and labor (x2,measured in hours). Its production function is y =…

Jim Corp. produces lecture slides y using two inputs, coffee (x1, measured in cups) and labor (x2,measured in hours). Its production function is y = 10 min{√x1,√x2}. That is, it needs one cup of coffee and one hour of labor to achieve any output; coffee is useless without time to work, and time to work is useless without coffee. Jim Corp. sells lecture slides on the thriving black market for economics for a price of $12 per unit. Coffee costs $2 per cup and labor costs $10 per hour.

Does Jim Corp.’s production function display increasing, decreasing, or constant returns to scale? Assuming that Jim Corp. maximizes profits, what is its optimal choice of production plan?

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