Suppose that a firm produces tables according to the production function Q = 2K6L.4. Wages (w) are $30 per hour and the unit cost of capital (r) is $60 per hour. What is the cost minimizing input combination that can produce Q = 1200 tables? What is the value of total cost? How would your answer change if r decreases to $45 per hour? (Resolve the model and determine the change in total cost).

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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.