Production of lollipops is one of fixed proportions

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Assume that the production of lollipops is one of fixed proportions. To produce one case of lollipops, it takes 0.5 person-hours and 1 machine-hour. Assume that the hourly wage rate is $9, and the hourly rental rate is $25.

a. Draw the expansion path for this production, including the isoquants q = 15 and q = 30, the cost minimizing combinations of L and K ((L*, K*) & (L**,K**)), and the associated isocost lines.

b. In a new graph, sketch the LR total cost curve, including the total cost for q = 15 and q = 30. Is the LR TC curve linear, convex, or concave? (Hint: think about returns to scale.)

c. In a new graph, draw the MC curve.

Reference no: EM131108656

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