rian uses wool (K) and labour (L) to produce t-shirts (q). The production function is: q = min{1/3L, 2K}. If he uses 1 kg of wool and 3 hours of labour, he can produce 1 t-shirt. 1. Draw isoquants for q = 1 and q = 2 on a diagram with labour on the horizontal axis and wool on the vertical.

rian uses wool (K) and labour (L) to produce t-shirts (q). The production function is: q = min{1/3L, 2K}. If he uses 1 kg of wool and 3 hours of labour, he can produce 1 t-shirt. 1. Draw isoquants for q = 1 and q = 2 on a diagram with labour on the horizontal axis and wool on the vertical.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 8P

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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

Brian uses wool (K) and labour (L) to produce t-shirts (q).

The production function is: q = min{1/3L, 2K}.
If he uses 1 kg of wool and 3 hours of labour, he can produce 1 t-shirt.
1. Draw isoquants for q = 1 and q = 2 on a diagram with labour on the horizontal axis and wool on the vertical.

2. The pice of wage per hour is given by w=$10 and the price of each kg of wool is given by r=$4. What is the optimal bundle of that he can produce in order to minimise costs? Draw the isocost lines.

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