Consider a competitive firm whose Cobb-Douglas production function is f (x1, x2) where x1 denotes the amount of labor and x2 denotes the amount of capital. Suppose that the amount of capital is fixed...

Extracted text: Consider a competitive firm whose Cobb-Douglas production function is f (x1, x2) where x1 denotes the amount of labor and x2 denotes the amount of capital. Suppose that the amount of capital is fixed in the short run at 2 = 100. Let the hourly wage rate be wi = $20, the capital rental rate w2 = $30 and the price of the firm's product p = $100. (a) Are the returns to scale increasing, constant or decreasing? Explain you assertion. (b) What is the short-run marginal cost function? (c) What is the average variable cost function of this firm? (d) What is the short-run output of this firm? (e) Will the firm continue to operate in the long run? Explain your assertion.