Draw a new isocost that still allows firm to produce output

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Problem: Draw an isoquant/isocost diagram that shows the following scenario. A firm using 10 units of both inputs to produce an output of 100. Label this point A. Suppose the price of input 1 (the horizontal axis input) increases. Draw a new isocost that still allows the firm to produce 100 units of output. Label this point B. Indicate clearly what happened to the use of input 1 and 2. Will it cost more for the firm to produce at point B or at point A and why?

Reference no: EM133595703

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