Cam?s Cannolis produces delicious desserts. Cam?s production function is depicted by the isoquants in the graph. Labor and capital are both priced at $10 per unit.

a. Add appropriately sloped isocost lines to the graph to determine the combination of labor and capital that minimizes the cost of producing each level of output shown in the graph.

b. Trace Cam?s expansion path.

c. Determine the total cost of producing each level of output shown in the graph.

d. Create a new graph of Cam?s total cost function, plotting output on the horizontal axis and total cost on the vertical axis.

Transcribed Image Text:

Capital (K) 40 35 Q = 100 %3| 30 25 20 15 Q= 80 10 5 Q = 50 Labor (L) 5 10 15 20 25 30 35 40