Answer to Question #79651 in Microeconomics for zeina

Question

3. (a) A firm produces margarine using vegetable oils and wooden paddles. Themore paddles the firm uses, the more efficiently the oils can be mixed, andso the less oil is required. The table below presents a variety of ways thatthey could produce 100kg of margarine.Oils 100 200 300 400 500 600 750 1000Paddles 60 30 20 15 12 10 8 6The price of paddles (and workers to use them) is £15, and the price of theoils (per litre) is £1.(i) Using a table, calculate the cost of each of these methods. Which method is cheapest and how much does it cost? [4 marks](ii) Draw the isoquant for 100kg of margarine and the isocost corresponding to the cheapest method above. [4 marks](iii) Can you say anything about whether the method you identified in (i) minimises costs? [3 marks](iv) A fellow student suggests to you that it is technically efficient to produce 100kg of margarine. Do you agree? [3 marks]

Answer 1

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