Please answer these 2 questions

6. Based on your table and chart, state the cost-minimising production plan, qL , 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 B56, the corresponding value for qK will be calculated automatically in cell B57.

7. Explain why the production plan you have identified above is cost-minimising. State the firm's level of expenditure/cost to produce the given level of output indicated (Y1). (Hint: refer to slide 34, week 4 notes.)

Costs in the long run In the long-run the firm can change all of its inputs, unlike the short- run when only some inputs are variable. What scale will minimise the firm's costs? Returns to scale . Long-run average cost curve: A curve showing the lowest cost at which the firm is able to produce a given quantity of output in the long run, when no inputs are fixed. . Economies of scale: Economies of scale exist when a firm's long- run average costs fall as it increases its scale of production and the quantity of output it produces. 24 1. Parameter table 2. Table of plot points Qn 1 Qn 4 0.5 IE1 IE2 1Q1 0.5 0 195.9 293.9 A 60 165.9 263.9 319.7 PL 1 120 135.9 233.9 159.9 pK 21 180 105.9 203.9 106.6 E 1 391.74 240 75.9 173.9 79.9 E2 587.74 300 15.9 143.9 63.9 Y1 554.00 360 15.9 113.9 53.3 420 83.9 45.7 Production function: Y=4(L^0.5 K^0.5) 480 53.9 40.0 540 23.9 35.5 Qn 3 600 32.0 Isoquant curve: qK = Yn^2/(4vqL)^2 Chart for Qn 2 and 5 IQ-IE plot 1350 300 250 |200 1Q1 150 FIE1 100 IE2 50 0 100 200 300 400 500 600 700 Qn 6 qL* Slope of isocost line: 0.50 qk* Slope of 1Q at identified plan: Qn 7