A widget manufacturer has an infinitely substitutable production function of the form q= 2K+L a. Draw the isoquant maps on a graph for q=20, q=40, and q=60. What is the RTS along these isoquants show formula and working? b. If the wage rate (w) is $1 and the rental rate on capital (v) is $1, what cost-minimizing combination of K and L will the manufacturer employ for the three different production levels in part a? What is the manufacturer’s expansion path, draw the line on the graph? (show all working for this) c. If (v) rose to $3 with (w) remaining at $1, what cost-minimizing combination of K and L will the manufacturer employ for the three different production levels in part a? What is the manufacturer’s expansion path, draw the line on the graph? (show all working for this)
A widget manufacturer has an infinitely substitutable production function of the form
q= 2K+L
a. Draw the isoquant maps on a graph for q=20, q=40, and q=60. What is the RTS along these isoquants show formula and working?
b. If the wage rate (w) is $1 and the rental rate on capital (v) is $1, what cost-minimizing combination of K and L will the manufacturer employ for the three different production levels in part a? What is the manufacturer’s expansion path, draw the line on the graph? (show all working for this)
c. If (v) rose to $3 with (w) remaining at $1, what cost-minimizing combination of K and L will the manufacturer employ for the three different production levels in part a? What is the manufacturer’s expansion path, draw the line on the graph? (show all working for this)
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