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A chair manufacturer hires its assembly-line labour for $18 an hour and calculates that the rental cost of its machinery is $6 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination. The firm is currently using 1 hour of labour for every 3 hours of machine time. (Assume that labour is on the horizontal axis and capital is on the vertical axis). 3. Graphically illustrate your answer by drawing an isoquant, an isocost line for the current combination of labour and capital and an isocost line for the optimal combination of labour and capital.

A chair manufacturer hires its assembly-line labour for $18 an hour and calculates that the rental cost of its machinery is $6 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination. The firm is currently using 1 hour of labour for every 3 hours of machine time. (Assume that labour is on the horizontal axis and capital is on the vertical axis). 3. Graphically illustrate your answer by drawing an isoquant, an isocost line for the current combination of labour and capital and an isocost line for the optimal combination of labour and capital.

Linear Algebra: A Modern Introduction
Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter2: Systems Of Linear Equations
Section2.4: Applications
Problem 27EQ
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The long run.

A chair manufacturer hires its assembly-line labour for $18 an hour and calculates that the rental cost of its machinery is $6 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination. The firm is currently using 1 hour of labour for every 3 hours of machine time. (Assume that labour is on the horizontal axis and capital is on the vertical axis).

3. Graphically illustrate your answer by drawing an isoquant, an isocost line for the current combination of labour and capital and an isocost line for the optimal combination of labour and capital.

  • An isocost corresponding to the optimal combination of labour and capital 
    • is       [a vertical line, a horizontal line, an upward sloping straight line, an upward sloping curve which is not a straight line, a downward sloping straight line, a downward sloping curve which is not a straight line, L-shaped] 
    • has slope       [ ]  at the optimal combination of inputs
  • An isoquant corresponding to the optimal combination of labour and capital 
    • is       [a vertical line, a horizontal line, an upward sloping straight line, an upward sloping curve which is not a straight line, a downward sloping straight line, a downward sloping curve which is not a straight line, L-shaped]
    • has slope       [ ]  at the optimal combination of inputs
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