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1. Demonstrate the difference between economic efficiency and technical efficiency, using isocost/isoquant analysis.
2. Draw a hypothetical isocost curve and an isoquant curve tangent to the isocost curve. Label the combination of inputs that represents an economically efficient use of resources.
a. How does a technological innovation affect your analysis?
b. How does the increase in the price of the input on the x-axis affect your analysis?
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Explain why this might reduce child labor. (Related to Application 7 on page 176.)
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If the actual marginal cost of increasing DO is $12, what is the socially efficient level of DO in the lake, assuming these three people are the only ones involved?
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