Is the new tangency point also the firms new equilibrium

Reference no: EM13238258

Suppose the price of Labor is $50 a day and the price of capital is $100 per day. Draw the iso-cost curve if the firm chooses to spend $10,000 a day. Add an isoquant tangent to the iso-cost at 120 units of labor. How many units of capital are employed? Let the price of capital fall to $80 a day. Draw the new iso-cost curve and add an isoquant to picture the new tangency point. Is the new tangency point also the firm's new equilibrium?

Reference no: EM13238258

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