The Three Brothers from Example 9.2 face per unit costs of $100 for capital and $50 for labor. They sell the product for $3.75 per unit. If they double all inputs it is felt that they will have no effect on the market price of the inputs, but to sell the additional output they will have to lower the price to $3.20. Should they expand operations?

EXAMPLE 9.2: The Sound of Three Hands Clapping Problem Statement: Using non-linear techniques, Three Brothers Manufacturing estimated their production function as Q = K +2KI. Interest arose as to how profits might be increased through higher levels of production. Could output be effectively expanded by an inflow of