Capital and labor are used in fixed proportions to produce an airline flight. It takes two workers (pilots) and one plane to produce a trip. Safety concerns require that every plane has two pilots. a) Describe the isoquant map for the production of air trips. b) Suppose an airline rented 10 planes and hired 30 pilots. Explain both graphically and in words why this would be a foolish thing to do. c) If the wage rate of pilot is $5 and the rental rate is $10 what is the combination of inputs we want to run 10 flights (i.e. Q=10). What is the cost associated with it? d) Suppose technical progress in avionic equipment made it possible for a single pilot to handle a plane safely. How would this shift the isoquant map described in part a? How would this affect the average productivity of labor in this industry? How would this affect the average productivity of capital (planes) in this industry?
Capital and labor are used in fixed proportions to produce an airline flight. It takes two workers (pilots) and one plane to produce a trip. Safety concerns require that every plane has two pilots.
a) Describe the isoquant map for the production of air trips.
b) Suppose an airline rented 10 planes and hired 30 pilots. Explain both graphically and in words why this would be a foolish thing to do.
c) If the wage rate of pilot is $5 and the rental rate is $10 what is the combination of inputs we want to run 10 flights (i.e. Q=10). What is the cost associated with it?
d) Suppose technical progress in avionic equipment made it possible for a single pilot to handle a plane safely. How would this shift the isoquant map described in part a? How would this affect the average productivity of labor in this industry? How would this affect the average productivity of capital (planes) in this industry?
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