2. Consider the CES production function y = A (807" + (1 - 0)47") -1/" over R$ where A > 0, 8 is some constant satisfying 0 0. (a) Show that the function is homogeneous and determine if it is increasing, decreasing or constant returns to scale. (b) Use implicit differentiation to compute the MRTS and determine whether it is constant (linear to the origin), diminishing (convex to the origin), or increasing (concave to the origin). Note: There are a few ways to do this. One is to use the messy formula presented in the notes, another is to form a generic isoquant and solve for 22 then compute the first and second derivatives, while another method is to use second order implicit differentiation. 2. Consider the CES production function y = A (807" + (1 - 0)47") -1/" over R$ where A > 0, 8 is some constant satisfying 0 0. (a) Show that the function is homogeneous and determine if it is increasing, decreasing or constant returns to scale. (b) Use implicit differentiation to compute the MRTS and determine whether it is constant (linear to the origin), diminishing (convex to the origin), or increasing (concave to the origin). Note: There are a few ways to do this. One is to use the messy formula presented in the notes, another is to form a generic isoquant and solve for 22 then compute the first and second derivatives, while another method is to use second order implicit differentiation