Both capital and labor are variable inputs. Suppose the wage rate of labor is 16 (per hour) and therental price of capital is 20 (per hour). The downward sloping smooth curves that bend in towardsthe origin are a firm's isoquants. The downward sloping straight lines are isocost lines. If the fermplans to produce 20 units of output lper hour), its minimized cost isCapitalslope=-0.8(6,5.5)(4,5)(2,3)q=30q=20q=10LaborO 180O 160O 164O 122

Economics is a branch of social science that describes and analyzes the behaviors and decisions…

Both capital and labor are variable inputs. Suppose the wage rate of labor is 16 (per hour) and the rental price of capital is 20 iper hourd The dovmward skoping smooth curves that bend in towards the origin are a firm's isoquants. The downuard skoping straight lines are isocest lines. If the firm plans to produce 20 units of output ber hour, its minimized cost is Capital slope=-0.8 (6,5.5) (4,5) (2,3) q=30 q=20 q=10 Labor O 180 O 160 O 164 O 122

Both capital and labor are variable inputs. Suppose the wage rate of labor is 16 (per hour) and the rental price of capital is 20 iper hourd The dovmward skoping smooth curves that bend in towards the origin are a firm's isoquants. The downuard skoping straight lines are isocest lines. If the firm plans to produce 20 units of output ber hour, its minimized cost is Capital slope=-0.8 (6,5.5) (4,5) (2,3) q=30 q=20 q=10 Labor O 180 O 160 O 164 O 122

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

Question

Both capital and labor are variable inputs. Suppose the wage rate of labor is 16 (per hour) and the
rental price of capital is 20 (per hour). The downward sloping smooth curves that bend in towards
the origin are a firm's isoquants. The downward sloping straight lines are isocost lines. If the ferm
plans to produce 20 units of output lper hour), its minimized cost is
Capital
slope=-0.8
(6,5.5)
(4,5)
(2,3)
q=30
q=20
q=10
Labor
O 180
O 160
O 164
O 122

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