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Question 1: Supply [9 Marks: 1.2.1.2,3] Carmaker produces small cars. As production emits pollution. Cannaker needs to buy:r pollution permits. It also needs to hire
Question 1: Supply [9 Marks: 1.2.1.2,3] Carmaker produces small cars. As production emits pollution. Cannaker needs to buy:r pollution permits. It also needs to hire labour. Carmaker's production function is given by: (1) q = min {c.osL. Em}, where E denotes the number of pollution permits. L denotes the amount of labour and min{a,b} denotes the minimum function where min{a,b} = a if a s b and min {a,b} = b if a e b. (a) [1 mark] Draw the isoquant corresponding to q = '10 in a clearly:r labelled diagram where L is in the xaxis and E is in the yaxis. Label two pairs of E and L in the diagram which give (1 = H). (b) [2 marks] 1|.r'lfhat is the marginal product of L and the marginal product of E when L = 40 and E = 1GB? Does the production function {1) exhibit constant returns to scale for all L 2:- DandEa-U
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