# Question: question 4 a the firm acme has the production function...

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Question 4 a) The firm ACME has the production function f ( K , L)=K 2 3 L 2 3 . Calculate an expression for the marginal product of labour, L , and establish if it is increasing, constant or decreasing. Verify if ACME’s production technology exhibits diminishing, constant or increasing returns to scale. (6p) b) Set up ACME’s long run profit maximization problem and derive the factor demands for optimal choice of y.

Question 5 (Credit question) Try to derive a long run supply function for ACME using your calculations in 4b). Did your effort result in a viable supply function? Explain why