Effects on isoquant and isocost of reduction in wages

Reference no: EM1370008

Assume that as the result of recent labor negotiation, wage rates are reduced by 10% in the production procedure employing only capital and labor. Supposing the other conditions (productivity for example) remain stable, find out what effects this decrease will have on the desired proportions of capital and labor employed in producing the given level of output at minimum total cost. (An isoquant/isocost diagram may help).

Reference no: EM1370008

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