Question 3 | [15 marks] Suppose the wage (w) is $20 and the price of coal (p) is $40 and a representative rm in the textile industry has two types of technologies available with a goal to produce one unit of cloth: Labour (L) Coal [R]: Technology A 8 units 4 units Technology B 2 unit 12 units a. Calculate the production costs required for the two types of technology. Which technology would a rm choose? (2 marks} b. Write down the equation of the isocost line for each technology. Make R the subject of the equation. (2 marks] c. Draw the two isocosts on a diagram. Indicate Technologies A and B and the relative input price. (2 marks} d. Suppose the wage increases to $30 per unit and the price of coal decreases to $15 per unit. Calculate the new production costs for the two types of technology. Which technology would a rm choose? {2 marks] e. Write down the equation of the isocost line for each technology after the change in the relative input price ratio. Make R the subject ofthe equation. (2 marks} f. Draw the new isocosts on the same diagram and indicate the relative input price ratio. (2 marks} g. Write down the equation to calculate the innovation rent. How much is the innovation rent