QUESTION 2 6 isocost 3 Based on the information in the graph aboive, what is the slope of the isocost line? # If the price of capital remains the same and the price of labor decreases, the isocost line will #. With the current mix of labor and capital, the marginal technical rate of subsitution is MRTS-3. If the prices of labor and capital remain as shown in the graph, then the firm will minimize the cost of production by :

QUESTION 2 6 isocost 3 Based on the information in the graph aboive, what is the slope of the isocost line? # If the price of capital remains the same and the price of labor decreases, the isocost line will #. With the current mix of labor and capital, the marginal technical rate of subsitution is MRTS-3. If the prices of labor and capital remain as shown in the graph, then the firm will minimize the cost of production by :

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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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.

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Step 1: Define the Isocost line.

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Step 2: Find the Slope of the IC line.

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Step 3: Find what happens to the IC line when r is constant and w decreases.

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Step 4: Find how the firm will minimize cost.

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