a) What were the pillars of Mercantilist thought?

b) If the MPPL / MPPK in the production of a good is less than w/r, why is the producer not in producer equilibrium? Explain how, with no change in budget size for the firm and with the given factor price ratio, output of the firm can be increased.

c) Suppose that the price or rental rate of capital rises. Explain how producers would respond, using the isocost/isoquant framework. What would happen to the capital/labor ratio in production?