A company uses two inputs, unskilled labour (L) and capital (K), to produce its product. The wage rate for a unit of labour is €5, while a unit of capital cost €20. a) Determine the equation and plot the isocost line for the company's expenditures on itsinputs of €1,000. Label the intercepts of the isocost with both axes. Draw a typical isoquant for an output level Q0 and indicate the optimal input levels of L and K. (Do not forget to label the axes). b) Suppose the government introduces a minimum wage for unskilled labour of €6 per unit.Show graphically and explain shortly how much it would cost the firm in the short run, with capital input fixed at K, to keep its output constant at Q0. c) Show graphically and comment shortly on the optimal factor mix that the firm would use to produce Q0 in the long run at the specified minimum wage of €6 per unit.

A company uses two inputs, unskilled labour (L) and capital (K), to produce its product. The wage rate for a unit of labour is €5, while a unit of capital cost €20. a) Determine the equation and plot the isocost line for the company's expenditures on itsinputs of €1,000. Label the intercepts of the isocost with both axes. Draw a typical isoquant for an output level Q0 and indicate the optimal input levels of L and K. (Do not forget to label the axes). b) Suppose the government introduces a minimum wage for unskilled labour of €6 per unit.Show graphically and explain shortly how much it would cost the firm in the short run, with capital input fixed at K, to keep its output constant at Q0. c) Show graphically and comment shortly on the optimal factor mix that the firm would use to produce Q0 in the long run at the specified minimum wage of €6 per unit.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: Production And Costs

Section21.5: Production And Costs In The Long Run

Problem 1ST

See similar textbooks

Similar questions

Use the line drawing tool to plot the functional relation. listed below on a scale diagram (with X on the horizontal axis and Y on the vertical axis) and compute the slope of the line. Make sure you start at the Y-intercept and label the line 'Line A'. Y = 20 + 3X Carefully follow the instructions above, and only draw the required object.
Technology B uses 4 workers and 2 tonnes of coal to produce 100 meters of cloth. The worker's wages cost $10 and coal costs $5. We have previously calculated that the total cost of production is $50 and that the vertical intercept of the isocost line is 10.If there was a technology that used 1 more worker, how much would it have to decrease the coal required in order to cost the same? (Note: this is the absolute value of the slope of the isocost line.)
It costs a company $58 to produce 6 units of a product and $78 to produce 10 units. Assuming that the cost is linear, how much does it cost to produce 25 units?
The revenue (in dollars) from the sale of x car seats for infants is given by the following function. R(x) = 56x – 0.020x? 0sxs 2800 (A) Find the average change in revenue if production is changed from 1,000 car seats to 1,050 car seats. (B) Use the four-step process to find R'(x). (C) Find the revenue and the instantaneous rate of change of revenue at a production level of 1,000 car seats, and interpret the results. (A) Find the average change in revenue if production is changed from 1,000 car seats to 1,050 car seats. (Round to one decimal place as needed.) (B) R'(X) = (C) R(1000) = R'(1000) = Interpret these results. Choose the correct answer below. O A. This means that at a production level of 1,000 car seats, the revenue is R(1000) dollars and is decreasing at a rate of R'(1000) dollars per seat. O B. This means that at a production level of 1,000 car seats, the revenue is R'(1000) dollars and is increasing at a rate of R(1000) dollars per seat. O c. This means that at a…
Suppose the production function for T-shirts can be represented as q = L^0.25 K^0.75. When K =1 and q = 2, what is the slope of the isoquant? If there is %3D %3D insufficient information to answer the question, describe what information is additionally needed.
The Retread Tire Company recaps tires. The fixed annual cost of the recapping operation is $60,000. The variable cost of recapping a tire is $9. The company charges $25 to recap a tire. For an annual volume of 12,000 tires, determine the total cost, total revenue, and profit. Determine the annual break-even volume for the Retread Tire Company operation. Graphically illustrate the break-even point using a one way table that relates volume to profit.
If r increases, C and w unchanged, the isocost will shift parallely to the right shift parallelly to the left pivot towards point of origin pivot away from the point of origin
Isoquant curves Gym requires exactly 3 bottles of water per athlete to maximise performance (athletes on horizontal) What is the shape is the isoquant curve? Find slope of cuve at: (20,15) (5,25) (5,15)
100VKL, where q is 4. The production function for puffed rice is given by q = the number of boxes produced per hour, K is the number of puffing guns used each hour, and L is the number of workers hired each hour. (a) Calculate the q = 1,000 isoquant for this production function and show it on a graph. (b) If K = 10, how many workers are required to produce q =1,000? What is the average productivity of puffed-rice workers? (c) Suppose technical progress shifts the production function to q = 200 VKL. Answer parts (a) and (b) for this new situation.
Prepare the scatter diagram and insert the trendline or line of best-fit. Use a scale of 2 cm to represent 1,000 units on the x-axis & 2 cm to represent $50,000 on the yaxis. Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.) Which of the two methods appear more appropriate? Explain your answer.
The revenue (in dollars) from the sale of x car seats for infants is given by the following function. R(x)=64x-0.020x² 0≤x≤3200 (A) Find the average change in revenue if production is changed from 1,000 car seats to 1,050 car seats. (B) Use the four-step process to find R'(x). (C) Find the revenue and the instantaneous rate of change of revenue at a production level of 1,000 car seats, and interpret the results. ... (A) Find the average change in revenue if production is changed from 1,000 car seats to 1,050 car seats. 23 (Round to one decimal place as needed.) (B) R'(x) =
the second image displays the function given in section 8.3.4 as mentioned in the question