6) Suppose that capital costs $10 per unit of use, while labor costs $10 per hour as long as the total quantity of labor hired is no more than 100 hours. Beyond that limit, overtime rates of $20 per hour must be paid. Carefully draw the family of isocost curves implied by this situation, with numerical markers where needed.

7) The industry supply curve is the sum of individual supply curves. The latter are all upward sloping. So the former must be upward sloping too. True of False. Explain.

8) Consider an Edgeworth Box economy, if there is another feasible allocation that both consumers prefer to the initial allocation, then that allocation is Pareto optimal.

9) Suppose that a firm is currently hiring a bundle of capital K and labor L, and it is determined that MP_L = 2 and MP_K = 4. The prices of labor and capital are given by w = 8 and r = 8. Carefully explain how the firm could produce more output with the same expenditure on inputs.

10. (5 0 ) If a machine pays off $100 each year for the next three years, but costs $280, then it is worthwhile to buy that machine. True or False? Explain.