4. (20 points) Suppose you are hired as a new manager of a firm producing 20...

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4. (20 points) Suppose you are hired as a new manager of a firm producing 20 units of output with 10 units of labor and 5 units of capital. Assume the price of labor is $90 and the price of capital is $120. Along the isoquant, the MRTSLK is as noted in Table 1. Table 1 MRTS 0.30 500 7.35 .600 .750 1.00 6.35 5.6 5 7 10 11 L Given the above graph and table: a) In detail, explain the optimizing decisions for minimize cost assuming you can only hire whole numbers of workers (Hint: think about the MC and MB of changing L). b) How much total cost will you be able to save by changing the input combination? a Points a b 220 d e Q=20 4. (20 points) Suppose you are hired as a new manager of a firm producing 20 units of output with 10 units of labor and 5 units of capital. Assume the price of labor is $90 and the price of capital is $120. Along the isoquant, the MRTSLK is as noted in Table 1. Table 1 MRTS 0.30 500 7.35 .600 .750 1.00 6.35 5.6 5 7 10 11 L Given the above graph and table: a) In detail, explain the optimizing decisions for minimize cost assuming you can only hire whole numbers of workers (Hint: think about the MC and MB of changing L). b) How much total cost will you be able to save by changing the input combination? a Points a b 220 d e Q=20

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a cost is mminimized when MRTSWR90120075 b ... View the full answer