Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The production q ( in units ) of a certain good in terms of the amount q L of labour invested and the amount q
The production in units of a certain good in terms of the amount of labour invested and the amount of capital invested is given by the production function At this moment, units of labour and units of capital are invested daily. This means that at this moment, units are produced daily. The graph below gives the contour line of level of the production function.
Figure : Contour line of level of the production function
a Give an implicit and explicit equation of this contour line.
Assume for this and later parts that a unit, of labour costs units of money and that a unit of capital costs units of money. Moreover, there is a fixed cost of units of money a day.
b Give the equation of the cost function
c Graph, in Figure above, a line that allows you to decide that there exists another combination to generate units a day with exactly the same cost as the combination
d Explain how you can approximately read this second combination from the graph above.
e Calculate this second combination exactly. Make use of your graphing calculator.
f Explain how you can graphically find the combinations to produce units a day in a cheaper way than by investing
g Describe the method to find the minimal budget to reach the daily production level geometrically.
h Calculate the minimal cost to realize production level and the number of units of capital and labour that have to be invested.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started