d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology). A cost-minimizing firm will be producing on a parallel isocost line. The fim will use more labour and less v capital and produce on a higher point on the same v isoquant curve.
d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology). A cost-minimizing firm will be producing on a parallel isocost line. The fim will use more labour and less v capital and produce on a higher point on the same v isoquant curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
I just need the answer for D please. In details
Transcribed Image Text:a. Compute ine totai coSI Tor eacn proaucuon metnoa ana TIIL IN the tabie.
80-
Units of
Capital
Production
Units of
Total
Method
Labour
Cost
75
A
120
21
S 486
70
B
100
26
$ 456
65
60
80
34
S 444
55
60
44
S 444
50
40
56
$ 456
8 45
F
20
71
$ 486
40-
b. Which production method minimizes costs for producing 500 tires? (Select all that apply.)
35-
Ở 30-
O Production method B
25-
O Production method F
20-
15
O Production method E
10
Isodost
Y Production method D
O Production method A
0-
120
80
100
Quantity of Labour
V Production method C
20
40
60
140
c. Plot the isoquant for 500 tires. Given the factor prices, draw the isocost line that corresponds to the cost-minimizing
production method.
1.) Using the multipoint drawing tool, plot and label the isoquant.
2.) Using the line drawing tool, plot and label the isocost line.
Carefully follow the instructions above, and only draw the required objects.
d. Now suppose the price of labour rises to $5 per unit, but the fim still wants to produce 500 tires per day. Explain how a
cost-minimizing firm adjusts to this change (with no change in technology).
A cost-minimizing firm will be producing on a parallel
isocost line. The fim will use more
labour and less
v capital and produce on a higher point on the same visoquant curve.
Quantity of Capital
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