Draw the isoquant corresponding to the following table, which shows the alternative combinations of labour and capital

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Draw the isoquant corresponding to the following table, which shows the alternative combinations of labour and capital required to produce 100 units of output per day of good X.

K            K

 16

 20

 262/3

40

60

80

100

L

200

160

120

80

531/3

40

 32

(a) Assuming that capital costs are £20 per day and the wage rate is £10 per day, what is the least-cost method of producing 100 units? What will the daily total cost be? (Draw in a series of isocosts.)

(b) Now assume that the wage rate rises to £20 per day. Draw a new set of isocosts. What will be the least-cost method of producing 100 units now? How much labour and capital will be used?

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Economics

ISBN: 978-1292187853

10th edition

Authors: John Sloman, Jon Guest, Dean Garratt

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