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Mad Max's Road Warriors fix potholes in interstate highways. Max's road crews fill potholes using workers and shovels in 1 to 1 correspondence. A worker with 1 shovel can fill 10 potholes in a day. A worker with 2 shovels can still only fill 10 potholes, as can 2 workers with 1 shovel.

a. Draw the production isoquant corresponding to filling 30 potholes.

b. Assume that production displays constant returns to scale, and draw a few more isoquants.

c. If shovels rent for $5, and workers must be paid $25, draw several isocost lines.

d. If Mad Max has received a state contract to fill 30 potholes, what is the minimum cost at which it can fulfill the contract?

e. If the cost of renting a shovel suddenly rises from $5 to $6, what will happen to the composition of inputs that Mad Max uses to fill potholes? Why?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M92089614

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