Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 5

Your company currently uses steel and aluminum in a production process. Steel costs $.50 per pound, and aluminum costs $1.00 per pound. Suppose the government imposes a tax of $.25 per pound on all metals. What affect will this have on your optimal input mix Show using isoquants and isocost lines.