1. SEATTLE, Washington Boeing is planning to increase the rate of 737 production to 50 aircraft per month from the current 40 aircraft per month.In preparation for this increased production, Boeing is introducing an automated wing assembly process that will reduce flow time by more than one-third. The photo below shows the new wing assembly machines.Boeing is also installing other sophisticated production equipment because the cost of such capital is falling relative to price of labor (lower cost of K, cost of L is unchanged).

a. Complete the isocost/isoquant diagram below showing this change in capital and labor (use the MS Word drawing tools - INSERT/SHAPE).Show and label the current and future optimal employment of capital (K) and labor (L).

b. A subsequent economic recession caused Boeing to reduce the B-737 production to 30 aircraft per month.Draw on the same diagram the optimal capital and labor for this reduced production level.

c. Boeing expects to increase production when the economy begins to grow.What will Boeing likely do with workers and the capital equipment in the short run while production is at 30 aircraft per month?