2. (a) Using is cost lines and isoquant curves explain how a firm chooses the right amount of labour and capital to use in order to produce a level of output at minimum cost.

(b) Using isoquants and isocost lines, examine the effects of the following: -

(i)A fall in the wage rate (L on the horizontal axis) where the cost of capital remains constant

(ii) An increase in the amount of money available for production