Essay
Answer the following:
a)Consider a firm which produces baseball bats using wood and workers.On a graph with capital (wood)on the vertical axis and labor (workers)on the horizontal axis,draw an isoquant and isocost line such that the firm is minimizing the total cost of producing Q1 baseball bats.Let this initial point be profit-maximizing.
b)Suppose forest fires cause the price of wood to rise.Trace the effects of this change on the firm's optimal combination of inputs.Will they now produce more or less than Q1 bats? Why?
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a)Let the price of wood be r and the pri...View Answer
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