In the above figure, labor costs $100 per unit. The manager wants to produce 2,500 units of output. You may assume that all the isocost lines shown in the above graph are parallel to each other. Answer the following questions:

(a) At point A is the slope of the isocost line greater than or less than the slope of the isoquant?

(b) What is the total cost of producing 2,500 units of output at point A? Please show your

calculations.

(c) What is the price of capital at point A? Please explain.

(d) When the firm moves from A to B on the isoquant, what happens to the quantity of labor and

the quantity of capital used?

(e) When the firm moves from A to B what happens to the output of the firm? Please explain.

(f) What is the total cost of producing at point B? Please show your calculation.

(g) What is the slope of the budget line at point C? Please explain.

(h) What is the slope of the isoquant at point C? Please explain.

(i) If the firm wishes to produce 2,500 units of output, please explain why the firm will not

choose to produce at point E on the graph. You must give an explanation.

90 C Capital (K) B Q - 2,500 0 10 20 30 40 50 60 Labor (4)