Suppose that a firm's cost per unit of labor (w) is $30 per day and its cost per unit of capital (r) is $50 per day.
a. Draw the isocost line for a total cost per day of $15,000. (Base case) and Draw the isoquant curve when this firm is producing efficiently, assuming output is 100 units. What are the maximum amount of K and L possibly used to produce 100 units?
b. If the price of capital decreases to $40 and other things remain constant, show the effect of a decrease in price on the producer's equilibrium. What are the new K and new L?
c. If the total cost increases to $30,000, other things remain constant, please draw the new isocost line and new isoquant curve, compared to part a.
d. What is the condition for cost minimization of inputs to produce100 units of output?