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6. A rm has two inputs, lemons and sugar, for its candyr output. it purchases sugar for $100 a ton. For lemons, however, the pricing
6. A rm has two inputs, lemons and sugar, for its candyr output. it purchases sugar for $100 a ton. For lemons, however, the pricing is different Lemons cost $100 a ton for first 4 tons, and then $50 a ton for more. [a] [Iarefullpr draw the isocost curve for a case in which the rm spends $1000. Put lemons on the horizontal axis. [5 points] [h] Suppose that the isoquant for 5 million candies is tangent to this isocost curve in two places. Assume that the isoqnant is smooth and has the usual curvature, {eg. A Cohh- Douglas production function]. Draw it. [5 points) [c] Now suppose that the lemon sellers change their pricing plan. Lemons will now cost $100 per ton for the rst E and then $50 per ton thereafter. 1What is the direction of the effect on the profits of a manufacturer who was making 5 million candies? Explain. [5 points]
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