1. (30 pts) ACME manufacturing is a producer of roadrunner traps. It may currently sell all the traps it can produce at

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1 30 Pts Acme Manufacturing Is A Producer Of Roadrunner Traps It May Currently Sell All The Traps It Can Produce At 1 (147.28 KiB) Viewed 35 times

1. (30 pts) ACME manufacturing is a producer of roadrunner traps. It may currently sell all the traps it can produce at $4 each. Its production is described by the Cobb Douglas production function Q=8K12L 1/4. It may buy all the capital and labor it wants at the constant input prices of r=$8 per unit of capital and w=$4 per unit of labor. a. Which type of returns to scale is present in ACME's roadrunner trap production? Show or explain how you know. b. Use the tangency rule to determine the cost minimizing combination of capital and labor if the firm wants to produce 120 units of output. Round your answer to the nearest whole number. c. Using your result from part B, what is ACME's current profit?