QUESTION 7 (10 MARKS) Consider the following information regarding a manufacturing firm: a) b) c) There are two inputs to production: labour and capital However, these inputs are perfect substitutes in production. The firm's existing technology allows one machine to do the work of three workers. The firm is interested in producing 100 units of output. Suppose the price of capital is $750 per machine per week. (3 marks) What combination of inputs will the firm use if the weekly salary of each worker is $300? (3 marks) What combination of inputs will the firm use if the weekly salary of each worker is $2257 (4 marks) What is the elasticity of labour demand as the wage falls from $300 to $225