Q4 A Using Figure 1 Below Shade The Set Of All Possible Combinations Of Labour And Capital Which Yield Output Of 2 1 (200.02 KiB) Viewed 46 times
Q4. > (a) Using figure 1 below, shade the set of all possible combinations of labour and capital which yield output of 20 units. (3 Marks) (b) Using figure 1 below, calculate the marginal rate of technical substitution when the use of capital changes from 8 to 3 units on isoquant with output of 10 units. (3 Marks) Isoquants for Capital and Labor 11 D 10 Higher output 9 8 7 Range A A capital 6 Capital 5 4 Isoquant for output = 20 3 Range B A capital 2 Isoquant for output = 10 1 Range C A capital { H o 1 2 3 4 5 6 7 8 9 10 Range A A labor Range B A labor Range C A labor Labor Figure 1: Isoquants for Capital and Labour
= = = 40 and the total farm (c) Given that the equation of the isoquant is Q = 4X, 12x,1/2 budget for is K7,000 (C). Input prices are as indicated below * Price X1 (Labour; plotted on the X-axis) = K35 * Price X2 (Capital; plotted on the Y-axis) = K70 i. What is the equation of the iso-cost line? (2 Marks) ii. What is the slope of the iso-cost line? (2 Marks) iii. What is the least cost combination of X1 and X2 for this isoquant? (4 Marks)
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