Question: a) John Wilson, the owner of a fast food restaurant, estimated that he can sell 1,000 additional hamburgers per day renting more automated equipment at a cost of $100 per day. Alternatively, he estimated that he could sell an extra 1200 hamburgers by keeping the restaurant open for two more hours a day at a cost of $50 per hour. Which one should he choose?

b) What type of returns to scale the following two production functions exhibit?

1. \(Q=5L+2{{L}^{2}}{{K}^{3}}\)
2. \(Q=100+{{L}^{0.5}}{{K}^{0.3}}\)

c. What is economies of scope? Consider the following cost function for a firm that produces two goods, Q1 and Q2 are the units of good 1 and good 2 produced:

To meet the market demand, the firm needs to produce 20 units of good 1 and 15 units of good 2. Does the firm have economies of scope in the production process? Show all your work and explain the answer.

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