Answer to Question #42370 in Microeconomics for JoJo

Question #42370
Suppose a small firm has a budget of $30 a day. The firm can purchase a unit of capital at $5 and a unit of labour at $1 a day. The firm's production function is given by Q = K*L, and the firm wishes to produce 45 units of output.

a) Draw a isocost line in a diagram (measure labour along the horizontal axis and capital along the vertical axis). What is the slope of the isocost line?

b) Find the various amounts of labour (L) necessary to produce the output level of 45 units, given, K=1, K=2, K=3, K=4, K=5, K=6, and draw the resulting isoquant in the same diagram as in part (a).

c) What is the cost minimising input combination that the firm should choose?
Briefly explain the condition for this optimum.

d) Suppose that the production process is using 6 units of capital. What should the firm do to minimize costs? Explain your answer in terms of the slopes.
1
Expert's answer
2014-05-16T11:10:16-0400
The answer to the question is available in the PDF file https://www.assignmentexpert.com/https://www.assignmentexpert.com/homework-answers/economics-answer-42370.pdf

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS