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    A firm is producing 200 units of output per period using input rates of L=4 and K=25. If the price of labor increases from Rs 4 to Rs 8 per unit, determine the efficient input combination for an output rate of 200. B. Determine the isocost equations corresponding to a total cost of Rs 200 and Rs 500. C. Determine the new Rs 500 isocost line and plot it on the same graph sketched in part 1.

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    A firm is producing 200 units of output per period using input rates of L=4 and K=25. If the price of labor increases from Rs 4 to Rs 8 per unit, determine the efficient input combination for an output rate of 200. B. Determine the isocost equations corresponding to a total cost of Rs 200 and Rs 500. C. Determine the new Rs 500 isocost line and plot it on the same graph sketched in part 1.

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    7 views1 page

    Assignment 4

    Uploaded by

    HammadSaleem
    A firm is producing 200 units of output per period using input rates of L=4 and K=25. If the price of labor increases from Rs 4 to Rs 8 per unit, determine the efficient input combination for an output rate of 200. B. Determine the isocost equations corresponding to a total cost of Rs 200 and Rs 500. C. Determine the new Rs 500 isocost line and plot it on the same graph sketched in part 1.

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    Managerial Economics Assignment # 4 Total Marks: 10

    Announced Date:3/05/2011 Submission Date: 17/05/2010

    Q# 1. What is production function? With respect to substitutability of inputs what are the features of different production functions? Q#2 The production function for Coca Cola industry is: Q = 20K0.5L0.5 a. The price of capital is Rs 5 per unit and the price of labor is Rs 4 per unit. The firm currently is producing 200 units of output per period using input rates of L=4 and K=25. Is this an efficient combination of inputs for producing an output rate of 200. What is the capital-labor ratio? b. If the price of labor increases from Rs 4 to Rs 8 per unit, determine the efficient input combination for an output rate of 200. What is the capital-labor ratio now? What input substitution has the firm made Q#3 Suppose the price of one unit of labor is Rs 10 and the price of a unit of capital is Rs 2.50. a. Use this information to determine the isocost equations corresponding to a total cost of Rs 200 and Rs 500. b. Plot these two isocost lines. c. If the price of labor falls from Rs 10 per unit to Rs 8 per unit, determine the new Rs 500 isocost line and plot it on the same graph sketched in part b.

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