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A firm uses only two inputs: capital (K) and labor (L).
a. Define an isoquant.
b. The price of capital (Pk) is $30 and the price of labor (PL) is $10. Graph the firm's isocost when total cost is 300$, labeling end points and the slope of the isocost.
c. Currently, the firm's marginal product of capital is 60 and the marginal product of labor is 10. Is the firm currently producing its output for the least cost way (or, equivalently, could it produce more output for the same cost)? Show carefully and if it is not show whether it wants to use more capital or labor. (Hint: what is the slope of the isoquant?)
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