Apu leases 2 squishy machines to produce 40 squishies in the short run. Apu's short-run cost function is: C(q, K) = 0.85
+ 0.5K, where q is the number of squishies produced and K is the number of squishy machines used. Apu's long-run cost function is: C_LR (q) = 1.13q^2/3. If Apu decides to lease 7 squishy machines, what happens to Apu's short-run average total cost of producing 40 squishies? Does Apu's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Question

Apu leases 2 squishy machines to produce 40 squishies in the short run. Apu's short-run cost function is: C(q, K) = 0.85

+ 0.5K, where q is the number of squishies produced and K is the number of squishy machines used. Apu's long-run cost function is: C_LR (q) = 1.13q^2/3. If Apu decides to lease 7 squishy machines, what happens to Apu's short-run average total cost of producing 40 squishies? Does Apu's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

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The Answer of Apu leases 2 squishy machines to produce 40 squishies in the short run. Apu's short-run cost function is: C(q, K) = 0.85 + 0.5K, where q is the number of squishies produced and K is the number of squishy machines used. Apu's long-run cost function is: C_LR (q) = 1.13q^2/3. If Apu decides to lease 7 squishy machines, what happens to Apu's short-run average total cost of producing 40 squishies? Does Apu's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Apu Leases 2 Squishy Machines to Produce 40 Squishies in the Short