1) Isoquant curves and isocost curves are tools that can explain how a firm might best respond to changes in the production environment.Present an example of an isocost curve where labor and capital are the two inputs, and explain what it is using language someone not trained in economics could understand.Present an example

of an isoquant in the same diagram you used for your isocost curve, and draw the isoquant so it cuts the isocost curve twice. Explain what an isoquant is using language someone not trained in economics could understand. Label the two points A and B, where the isocost and isoquant curves intersect.Present a logical argument

that explains why the firm should operate neither at point A nor point B, and present a point that would be optimal by drawing a new isoquant curve in the diagram.Add a second isocost curve to your diagram such that the firm is spending more money on inputs.Add a third isoquant to your diagram to show a firm that would become more capital intensive as it expanded.

2) Some economies are less healthy than they could be because both the market power and economic profit of some favored firms are protected by either government or some private force (e.g. mafia). Present a firm that hasmarketpowerandisearningeconomicprofitwhenitismaximizingprofit.Explainhowcompetition couldhelpconsumersbyshowinghowtheprofitmaximizingpointforthisfirmmightchange,tothe advantage of consumers, if competitors entered this market and competed against this firm.