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4. A firm produces output (Q) using capital (K) and labor (L). Production exhibits a diminishing marginal rate of technical substitution of labor for capital.
4. A firm produces output (Q) using capital (K) and labor (L). Production exhibits a diminishing marginal rate of technical substitution of labor for capital. The firm purchases capital and labor at prices of r SS0 and w=$30. In the short run, the firm produces 300 units of output by employing 10 workers and 20 units of capital. At this input bundle, the marginal product of capital is 12 and the marginal product of labor is 18. Show this situation on a well annotated isoquant/isocost diagram AND then use your diagram to illustrate how the firm can alter its input levels to produce the same 300 units of output at a lower total cost in the long run
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