Explain and illustrate using isoquants and isocosts how a firm that is currently using the least cost combination to produce its desired quantity of output will respond in the long run to a government policy that (assume it will continue to produce the same Q)  a. reduces wages of its workers  b. subsidizes the cost of capital used by the firm

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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.