In the short run, a firm cannot vary its capital, K=2, but it can vary its labor, L. It produces output, q. You are given two production functions. (a) q = 10L + K           MPL = 10 (b) q = L0.5K0.5              For each production function, please determine whether the production function will show diminishing marginal product (diminishing marginal returns) as labor increases. You must give an explanation for each answer. (Note: Diminishing returns of labor refer to the decrease in marginal product of labor as the quantity of labor increases).

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Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.