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A firm uses labor (L) and machines (K) to produce some output.  The cost of labor is $40 per unit


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A firm uses labor (L) and machines (K) to produce some output.  The cost of labor is $40 per unit and the cost of using a machine is $10.

 (a)  Derive an equation for the isocost line. 

(b)  Draw an isocost line for this firm, showing combinations of labor and machines that have a total cost of $400.  Label this line (C0 = $400).  Draw another line (on the same graph) showing combinations that cost $200.  Label this line (C1 = $200).  Be sure to clearly identify the intercepts.

(c)  What is the slope of the isocost line C0 = $400?  What is the slope of the isocost line C1 =$200? 

 


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A firm uses labor (L) and machines (K) to produce some output.  The cost of labor is $40 per unit.zip

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This paper was answered on 14-Oct-2020

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