Answer on Economics of Enterprise Question for Annette
City and produce frozen yogurt cones (q). The frozen yogurt production process is fairly
standardized, so they all use the same inputs: frozen yogurt machines, M, with a rental price of $80
per machine and tubs of yogurt, Y, at price $. However, they each have their own “secret” method
for producing frozen yogurt and thus have different production functions:
a. Roughly sketch the isoquants for all three frozen yogurt stores with M on the y-axis. Label any
point on an isoquant representing an output of 60 cones of frozen yogurt.
b. If each store has 1 frozen yogurt machine in the short-run, what are their short-run cost
Now, assume that tubs of yogurt cost $5 each (the rental price of machines is still $80) and they are
in the long run so Rufus, Otis, and Stella can all vary the number of frozen-yog
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