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4. (a) Define the following terms: - (i) Marginal Rate of Technical Substitution (ii) Isoquant curve (iii) Isocost line (1 mark for each) (b) Stating
4. (a) Define the following terms: - (i) Marginal Rate of Technical Substitution (ii) Isoquant curve (iii) Isocost line (1 mark for each) (b) Stating any assumptions made, explain the difference between diminishing marginal product of labour and decreasing returns to scale. (6 marks) (c) Sketch an isoquant map diagram showing how a firm might react to an increase in the cost of capital where the wage rate remains constant. (6 marks)
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