What is the average cost of production

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(i) Imagine that the wage rate (w) = 10 and cost of capital (r) = 0.1. Given this information, answer the following questions:

(a) Find the slope of the isocost line.

(b) What is the slope of the isoquant where it is tangent to this isocost line?

(c) If the marginal product of labour used in production at this point is 50 pencils per hour, what is the marginal product of capital used?

(ii) Zemaleck is a company which produces fabrics. The wage rate (w) is R100/hour; cost of capital (r) is 0.1; the machinery used is worth R20 000 and 20units of labour are used. Showing all working:

(a) Find the total cost of production.

(b) If 20 rolls of fabric are produced, what is the average cost of production?

Reference no: EM133084417

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