Substitute between labor and capital in producing shoes

Assignment Help Business Economics

Reference no: EM131112338

Suppose shoe manufacturers can substitute between labor (L) and capital (K) in producing shoes. Further suppose that due to global competition the price of capital equipment used to produce shoes has decreased significantly. Assume shoe manufacturers want to minimize the cost of producing shoes. Using an isocost-isoquant model, illustrate graphically (with labor on the horizontal axis and capital on the vertical) and discuss how the price decrease in shoe manufacturing equipment would change:

a. the isocost line for producing a given output of shoes (call that output 10,000Q),

b. the combination of labor and capital used to produce 10,000 shoes,

c. the marginal rate of technical substitution of labor for capital (MRTS) for producing 10,000 shoes, and

d. the total cost of producing 10,000 shoes.

Reference no: EM131112338

Questions Cloud

Preventive care is not always cost-effective : Preventive care is not always cost-effective. Suppose that it costs $50 per person to administer a screening exam for a particular disease. Also suppose that if the screening exam finds the disease, the early detection given by the exam will avert $5..

What is the market price that will be charged : Both Ingrid, Inc. and Sydney, Inc. buy gasoline from the same supplier and can buy all they want at $2.20 per gallon. Assuming that both companies want to maximize their profit and do not violate any collusion laws, how much will each firm sell (i.e...

Individuals to deduct the cost of health insurance premiums : The federal tax code allows businesses but not individuals to deduct the cost of health insurance premiums from their taxable income. Consider a company named HeadBook that could either spend $5,000 on an insurance policy for an employee named Vaness..

True of the european currency unit : Which of the following is true of the European currency unit a) used a medium of exchanging goods and services b) accounting entry between 2 European nations c) it was denominated in the British pound d) primary international reserve asset of most na..

Substitute between labor and capital in producing shoes : Suppose shoe manufacturers can substitute between labor (L) and capital (K) in producing shoes. Further suppose that due to global competition the price of capital equipment used to produce shoes has decreased significantly. Using an isocost-isoquant..

If government increases expenditure without raising taxes : If government increases expenditure without raising taxes, this will:

Sequence with the manufacturer deciding the whole sale price : Here we have two important players: manufacturer (Hyundai, whose strategy is the wholesale price w) and retailer (car dealer, whose strategy is the retail price p). Moreover, they move in a sequence with the manufacturer deciding the whole sale price..

Regions rate the importance of quality of top management : Why do analysts in the US and Europe pay more attention to corporate governance? How do analysts in different regions rate tthe importance of the quality of top management? If you were a CEO of a listed company in Asia, what are the top three areas t..

Compare two methods of monopoly regulation : Compare two methods of monopoly regulation. Discuss the pros and cons of two monopoly regulation methods and evaluate their effectiveness: Which regulation method is the most effective? Why? Which regulation method fits and exemplifies the two regula..

User Account

All Pages