Answered: Y Quantity of output Production…

Business

Economics

Y Quantity of output Production function Quantity of labour Figure

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 17P

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Concept explainers

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.

Question

The production function for cups in the image uses a variable amount of labor and a fixed a mount of capital to produce output. The production function exhibits diminishing returns to labor. Suppose the techonology in producingc cups improves. In the graph in the image, show how this will affect the production function.

Y
Quantity
of output
Production function
Quantity of labour
Figure

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