Question: 2. (14 points) Mr. T's Donut Shop is in a competitive market. The production function is given by f(L, K) = L1/6K1/6. Suppose that the

2. (14 points) Mr. T's Donut Shop is in a competitive market. The production function is given by f(L, K) = L1/6K1/6. Suppose that the wage rate is 2, and the rental rate of capital is 8. (a) Does the production function exhibit constant, increasing, or decreasing returns to scale? What is the degree of homogeneity of this production function? (b) Derive the long-run cost function of Mr. T's Donut Shop. (c) Write down the longrun supply function of Mr. T's Donut Shop

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