Question

Show with isoquant analysis the effect on the cost minimized output if:

a. Due to concerns that firms are automating too much, the government has decided to impose a tax on capital equipment to get firms to replace some capital with additional workers.

b.   A period of prolonged inflation raises the price level of all inputs in society (you can assume the firm will still spend the same amount of money)

c.   Minimum wage in society rises (you can assume this firm hires minimum wage employees), however to prevent growing unemployment, the government requires all firms to employ the same number of workers before and after the wage change.

d.   To take advantage of good economic situations, firms have increased their production budget.

Answer 1

Point to note from an above question :

a) Capital investment in machinery is replaced by labors.

b) Still, all cost of production is the same.

c) A minimum of wase employees are hired by the company.

d) production budget increases.

The Iso-product curves show the different combinations of two resources with which a firm can produce an equal amount of product.” so from above we can have the below diagram

Diagram for Iso

units	labour	Capital
A	2	10
B	4	20
C	6	30