Answer to Question #267651 in Microeconomics for Katie

Question

1.Suppose an isoquant for a particular production process were so tightly curved that it was almost L-shaped. What would this imply about the technology?

2.Why is the TP of labor curve never downward sloping?

3.If MP is declining, is AP always declining? Why or why not?

Answer 1

This tends to imply that technology is fixed at a normal state. This is the average state of technology, therefore there are no more or less event to increase or decrease immediate level of production.

This is because labour's optimum demand tends to fall if MPL is equal to real wage rate.