Problem
A firm uses two inputs, capital and labor, to produce output. Its production function exhibits a diminishing marginal rate of technical substitution.
a) If the price of capital and labor services both increase by the same percentage amount (e.g., 20 percent), what will happen to the cost-minimizing input quantities for a given output level?
b) If the price of capital increases by 20 percent while the price of labor increases by 10 percent, what will happen to the cost-minimizing input quantities for a given output level?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.