Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Business Economics Expert

Derivation of iso-cost line.

A industry uses two inputs, unskilled labor (L) also capital (K) to produce its product. The wage rate for one unit of labor is $5, while units of capital cost $20. The industry's production function per day is Q (L, K) =4LK, while the MPL=4K also the MPK=4L. The industry wants to keep a constant production of Q0=400 units of output per day.

1. Suppose the federal government institutes a minimum wage for unskilled labor of $10 per unit. In the short run, with capital fixed at the level K*, describe how much would it cost the industry to hold the output constant at Q0? Draw the new isocost line associated to this new cost in the same graph as in part b) also clearly label the intercepts.

2. Find analytically the optimal level of inputs L** also K** which the industry will use in the long run to produce Q0, given the minimum wage. Illustrate what is the cost associated to this choice? Represent the new isocost also L** also K** in the same graph as above.

3. describe how do you compare the original cost in a) with the costs in c) also d)? Give the economic intuition behind these results.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916562

Have any Question? 


Related Questions in Business Economics

During a recession the manager for best buys wants to

During a recession the manager for Best Buys wants to increase sales volumes of both flat screen TVs and DVD players to help that department reach its sales goal; however, a recent market research department analysis sho ...

What does the branch of microeconomics deal with in simple

What does the branch of microeconomics deal with in simple terms. Please be specific

Productivity is the major driver of economic growth in the

Productivity is the major driver of economic growth in the United States, accounting for about half of the increase in real GDP over time. Between 1996 and 2001, productivity showed no trend and averaged about 2.7 percen ...

Assume that the population of lauronia increased and so did

Assume that the population of Lauronia increased and so did its total production, since more people can produce more things. What would this look like on a graph of the production possibilities frontier? a) a new curve t ...

Discuss the impact of major accountingfinancial scandals on

Discuss the impact of major accounting/financial scandals on investors’ asset preferences. In your opinion how do the scandals affect foreign markets? Discuss two macro variables that affect changes in interest rates/or ...

Hmpton corporation balance sheet december 31 2011 cash

HAMPTON CORPORATION Balance Sheet December 31, 2011 Cash $ 24,600 Accounts payable $ 25,600 Accounts receivable 45,500 Common stock ($10 par) 80,000 Allowance for doubtful Retained earnings 127,400 accounts (1,500) $233, ...

Equivalence for repeated cash flows assume the price of the

Equivalence for Repeated Cash Flows (assume the price of the car does not change over 4 years) A student is buying a new car. The car’s price is $19,500, the sales tax is 8%, and the title, license, and registration is $ ...

Long-term investment and cost-benefit analysiswhen it comes

Long-Term Investment and Cost-Benefit Analysis When it comes to expanding the business, there are many factors that comes into play in determining whether to expand or shut-down the business. For example, McDonalds took ...

Suppose the most you would be willing to pay to have a

Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $8.00. The smallest amount for which you would be willing to wash someone else's car is $5.50. You are going out thi ...

An investor estimates that investing euro5 million in a

An investor estimates that investing €5 million in a particular venture capital project can return $40 million at the end of five years if it succeeds; however, she realizes that the project may fail at any time between ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate