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Afirm uses labor l and machines k to produce some output

A firm uses labor (L) and machines (K) to produce some output. The cost of labor is $40 per unit and the cost of using a machine is $10.

(a) Derive an equation for the isocost line.

(b) Draw an isocost line for this firm, showing combinations of labor and machines that have a total cost of $400. Label this line (C0 = $400). Draw another line (on the same graph) showing combinations that cost $200. Label this line (C1 = $200). Be sure to clearly identify the intercepts.

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Macroeconomics: Afirm uses labor l and machines k to produce some output

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