Question: Gob runs a magic trick factory that uses a fixed proportion production function: q = min{aL, bK} where q is the output of magic tricks


Gob runs a magic trick factory that uses a fixed proportion production function: q = min{aL, bK} where q is the output of magic tricks given labor and capital inputs L and K, respectively, and proportion requirements a, b > 0. Suppose that Gob introduces robots into his factory which means that he now requires less capital to make magic tricks (e.g. this is a capital-biased technical change). Draw and label two sets of isoquants that show how the introduction of robots affects production. 12 points
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