Problem
1. To produce sweaters, a manager can rent machine hours for $8/hour and hire labor for $32/hour. If labor is plotted on the x-axis then what is the slope of the isocost line?
Slope = -32/8 = -4.
Do not understand this question. Are we missing a variable? C?
2. Given the info above (in part a) to achieve a desired output for the least cost, the firm manager should choose inputs until MRTS equals what? Explain briefly.
3. New scenario << If a production manager finds that MRTS for a given level of output is greater than the wage- rental (w/r) ratio, then what should he/she/they do to minimize the firm's cost? [Labor is plotted on the x-axis]
4. Graph the situation and recommendation in part 3) plotting labor on the x-axis.