MPl = 2.
a.) Suppose the firm wants to produce Q=30. If the firm only uses capital, how many units does the
firm use? If the firm only uses labor, how many units does the firm use?
b.) In a graph with labor on the horizontal axis, what is the slope of the isoquant? (You might want to
find the MRTS.)
c.) Now that you have the slope and end points, graph the isoquant below.
d.) Suppose that R= 1 and W = 1. Therefore equation for the isocost line is C = L +K. What is the slope
of the isocost line?
e.) Suppose the firm uses only labor. Graph the isocost line. What is C?
f.) Suppose the firm uses only captial. Graph the isocost line. What is C?
g.) If the firm wants to minimize costs, how many units of K and L does the firm use?