Suppose the wage rate for labor is $20 an hour and the rental rate for capital is $50 per hour. Based on this information, please answer the questions appearing below the questions appearing below the graph.

a. Draw the iso-cost line associated with an hourly budget of $1,000.

b. What is the least-cost level of capital and labor this business should utilize when packaging 1,000 cases of fruit juice? How did you arrive at this answer?

c. How much does it cost this business to package 1,000 cases of fruit juice? If the firm can sell the juice for $50 per case, what is its accounting profit?

Transcribed Image Text:

CAPITAL 80 70 60 50 40 30 isaquant 20 A 10 10 isogcoft 20 30 40 50 60 1,000 Cases 70 80 CAPITAL 80 70 60 50 40 30 isaquant 20 A 10 10 isogcoft 20 30 40 50 60 1,000 Cases 70 80

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a Wage rate for labour is 20hr Rental rate for capital is 50hr The fixed amount o... View the full answer