Produced with skilled labor and low-tech capital

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Reference no: EM132222268

Suppose that a consumption good is produced with skilled labor and low-tech capital. The market wage for skilled labor is currently $20/hr and the market price of low-tech capital is $4/unit. The production functions for this good is:

qbeta = K E

a. Plot the isoquant as carefully as possible on graph paper.

b. If the producers of this good want to produce 125 units of output, describe their cost-minimizing choices of labor and capital. You should be able to get a close approximation by graphing carefully or an exact answer mathematically by figuring out what MPL and MPK are. Label your answers on the graph.

c. Does this cost-minimizing set of inputs change when the wage rate falls to $15 per hour? Explain in which direction and why. (You do not need an exactly set of numbers here.)

Reference no: EM132222268

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