In the isoquant/isocost diagram (Figure 1), suppose the firm is producing 1,000 units of output at point A using 100 units of labor and 200 units of capital. As an outside consultant, what actions would you suggest to manage- ment to improve profits? What would you recommend if the firm were operating at point B, using 100 units of

In the isoquant/isocost diagram (Figure 1), suppose the firm is producing 1,000 units of output at point A using 100 units of labor and 200 units of capital. As an outside consultant, what actions would you suggest to manage- ment to improve profits? What would you recommend if the firm were operating at point B, using 100 units of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Alex uses wool (K) and labour (L) to produce t-shirts (q). The production function is: q = min{L/4, K^0.8}.If he uses 1 kg of wool and 3 hours of labour, he can produce 1 t-shirt.1. Draw isoquants for q = 1, q = 2 and q = 3 on a diagram with labour on horizontal axis and wool on vertical. 2. Given that the price of labour is w=$10 and the price of each kg of wool is p=$6What is the optimal amount of labour and fruit to use to produce q T-shirts, if she wants to minimise costs? Draw on the diagram from 1.) by with corresponding isocost lines
Explain Isocost line?
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