a. Suppose that a college education creates job-specific knowledge and skills that make people better workers. Also suppose that college-educated workers require higher wages than non-college-educated workers. On the graph below, show how a firm's optimum isoquant and/or isocost line could change as it switched from a non-college-educated workforce to a college-educated workforce. Explain your reasoning for any change that you make to the graph.

b. Suppose that advances in automation enhance the productivity of capital. On the graph below, show how a firm's optimum isoquant and/or isocost line would change if the firm prefers to keep its total costs constant.

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Capital Labor Capital Labor

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answers 1 Increase in productivity of labour by changing ... View the full answer