Solution-Fixed proportions production function

Fixed proportions production function

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Suppose wanda´s widgets has a fixed proportions production function. It currently delivers 1000 widgets per month to its only customer. Currently, wanda´s costs are $2000 per month per machine and $4000 per month per worker. Wanda uses 20 machines and 10 workers to produce 1000 widgets each month. If the cost of machines fall to $1600 per month and wanda continues to produce 1000 widgets, what happens to total costs? Show this in a graph, using one isoquant and a pair of isocost lines. (Hint: what are the horizontal intercepts of the old and new isocost lines?)

Reference no: EM131048903

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Fixed proportions production function : Suppose wanda´s widgets has a fixed proportions production function. It currently delivers 1000 widgets per month to its only customer. Currently, wanda´s costs are $2000 per month per machine and $4000 per month per worker.

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Fixed proportions production function

Reference no: EM131048903

Reference no: EM131048903

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