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?
