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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