Suppose that during a recession labour costs fall by 66.67% and are expected to stay at that level for a long time, whil

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Suppose that during a recession labour costs fall by 66.67% and are expected to stay at that level for a long time, while the rental cost of capital stays the same. Draw the firm’s output expansion path before and after the recession. Assume that the firm has downward sloping strictly convex isoquants. (Draw several isoquants and isocosts). Put labour on the horizontal axis.
New isocosts will have slope equal to [ four times,three times,twice,exactly, one third, two thirds, one fourth] the slope of the original isocosts.
The firm will hire [ more, less, the same amount of ]labour and [ more,less, the same amount of]
capital to produce the same amount of output.
Output expansion path will [ shift to the right, shift to the left, stay the same ] .