capital and labor used to produce 10 widgets given the wage and cost of capital. a. Suppose the wage (w) is $10 and the cost of capital (v) is $15. What is the average total cost of producing 10 widgets when they are produced in the least-cost way? b. Still using w=$10 and v=$15, what is the Rate of Technical Substitution at the point K-6 and L=8? How do you know? c. Suppose that, at K-6 and L=8, the marginal product of labor is 20. Continue using w=$10 and v=$15. What is the marginal product of capital at this point? How do you know? d. Suppose the wage rises to $15. Draw a new total expenditure line representing the least-cost way of producing q=10, based on this new wage and the original cost of capital (v=$15). How will the new least- cost method of producing q=10 change now that the wage has changed?
Fig: 1