a) Show an optimal combination of capital and labor for a typical cobb-douglas production function using an Isocost-Isoquant diagram. (please assume Labor is along the horizontal axis).
b) Say the minimum wage was increased by $5/hr. Show in the diagram the result of this change, by changing the Isocost-Isoquant diagram you used for part (a). Show the new combinations of Labor and Capital.
c) How it may be possible for increases in the minimum wage to have little impact on employment levels. Please explain IN WORDS (no diagrams) using the following concepts: a) long-run versus short-run; b) fixed inputs; and c) increase demand/output