(a) Explanation The value of K can be calculated from the production function as follows: K 1 2 = q 10 L 1 2 (1) Substitute 100 as q in Equation (1) to find the value for K. K 1 2 = 100 10L 1 2 K = ( 10 L 1 2 ) 2 K = 100 L (2) The value of K is 100 L . When the labor is 10 units, the capital value can be calculated by substituting the respective value in Equation (2) as follows: K = 100 10 = 10 The value of K is 10 when the labor quantity is 10. Table 1 shows the value of K at different level of labor (L) that is obtained using Equation (2) as follows: Table 1 Q L K 100 10 10 100 20 5 100 30 3.33333 100 40 2.5 100 50 2 100 60 1.66667 Here, choose various combinations of L and K to plot the isoquant line. In Figure 1, the optimal point is determined by the tangency between the isocost line and the isoquant line (b) To determine Identify the new TC of the firm. (c) To determine Identify the cost minimizing level of capital and labor in the long run. (d) To determine Identify the optimal level of capital and labor.

Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)

9th Edition

ISBN: 9780134643175

Author: Robert Pindyck, Daniel Rubinfeld

Publisher: PEARSON

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Question

Chapter 7, Problem 11E

(a)

To determine

The graphical representation of the isoquant and isocost lines.

(b)

To determine

Identify the new TC of the firm.

(c)

To determine

Identify the cost minimizing level of capital and labor in the long run.

(d)

To determine

Identify the optimal level of capital and labor.

Expert Solution & Answer

Chapter 7 Solutions

Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)

Ch. 7.A - Prob. 1E Ch. 7.A - Prob. 2E Ch. 7.A - Prob. 3E Ch. 7.A - Prob. 4E Ch. 7.A - Prob. 5E Ch. 7 - Prob. 1RQ Ch. 7 - Prob. 2RQ Ch. 7 - Prob. 3RQ Ch. 7 - Prob. 4RQ Ch. 7 - Prob. 5RQ

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