Write a definition and draw a graph for the isoquant, assuming that the two factors of production are capital (K) and labor (L). Explain the law of diminishing marginal returns and if it applies or not applies to a production function of the form Q = a + bL + cK.

Assume that price of labor is w = 10, and the cost of capital is r = 20. Assume that the company Impaling Poles ‘r Us has the following production function, q = KL. Assume that the company is currently producing where the marginal rate of technical substitution (MRTS = MUl/MUk) is ? (0.33). Would it be more efficient for the firm to substitute a unit of labor for a unit of capital or the opposite? Why?

Use the concepts of MRTS, MPl, MPk, r, w, and diminishing marginal returns to describe the shift in grocery stores check outs lines from one worker per register to some self-checkout lines, and why there is no store that uses only self-checkout lines. Use evidence from the web.

Using the same concepts, explain why convenience stores do not use self-checkout lines.