Answer the questions below by filling in/ editing the boxes/chart provided. 1. This question will involve using the equation for the isocost line to calculate a set of plot points for an isocost line. Use the prices (pl and pK) and expenditure levels (E1 and E2) from the Parameter table, calculate two sets of points for two isocost lines (in the Table of plot points) for the range of qL shown in the table. Each set of plot points is for an isocost curve (IE1 and IE2). Note, if you calculate a negative number, leave it blank. 2. Add the isocost lines IE1 and IE2 to the chart. Note: qL is on the horizontal axis. (See the article in Tool #1 on how to add data to an existing chart.) 3. This question refers to the production function below the Parameter table - in the form Yn = A(qL^c qK^d). Rearrange this function, using the relevant numbers (A, c, d) from the Parameter table, to get an isoquant curve equation, Qk = F(QI,c,d, Yn,A). 4. This question will involve using the equation for the isoquant curve and a given level of output to calculate a set of plot points. Using the given level of output indicated (Y1), calculate a set of points (in the Table of plot points) for the range of qL shown in the table. Note, the formula for the first point where qL > 0 for the isoquant curve has been entered in the table. 5. Plot the isoquant curve using the plot points calculated in the question above (as a scatter chart with a smooth line). (L.e. update/add the IQ data series in your chart.) 6. Based on your table and chart, state the cost-minimising production plan, q*; qK* (i.e. a pair of ql; qK values). Note: the equation for the isoquant can be used to calculate qk* as a function of qL*. In the spreadsheet, if you enter a value for qL in cell B55, the corresponding value for qk will be calculated automatically in cell B56. 7. Explain why the production plan you have identified above is cost-minimising. State the firm's level of expenditure/cost to the given level of output indicated (Y1). (Hint: refer to slide 34, week 4 notes.) 1. Parameter table 2. Table of plot points Qn 1 Qn 4 0.5 X IE1 IE2 101 d 0.5 0 A 30 239.4 PL 1/ 60 pK 90 E1 239.71 120 E2 359.78 150 Y1 839.00 180 210 Production function: Y=4(L^0.5 K^0.5) 240 270 Qn 3 300 soquant curve: Chart for Qn 2 and 5 IQ-IE plot 300 250 200 150 +1Q1 100 50 50 100 150 200 250 300 350 Qn 6 qL* Slope of isocost line: -0.50 qk* Slope of IQ at identified plan: Qn 7