Suppose that for a firm that digs ditches for laying cable, Ask an Expert

Economics

Suppose that for a firm that digs ditches for laying cable or pipeline, backhoes and backhoe operators are pure complements in production, being used on a one-for-one basis. Draw the isoquants (on a graph with backhoe, K, and backhoe operators, E, on the axes) for the production of three different quantities of ditches. Do they have a funny shape?

a) Now consider one such ditch-digging firm that has five backhoes but employs six backhoe operators. Can you explain why this might make sense? (Hint: think about whether/how the marginal product of the sixth backhoe operator could be positive)

b) Now suppose you see another ditch-digging firm that has seven backhoes but employs six backhoe operators. How could this make sense?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91409615

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