Solve the cost minimization problem for technology

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Reference no: EM13223115

he factory owner can choose between two technologies A and B: One uses capital and labor as complements yA = min [3k; 2l] and the other one as substitutes yB = k + 2l:

a. Draw the isocost lines of both technologies on the same diagram.

b. Denote price of capital with r and price of labor with w: For each technology, solve the cost minimization problem for each technology and derive the demands for factors for all levels of prices w and r:

c. Assume that in the long-run, the factory owner can freely switch between technologies. For which prices is technology A going to be used (i.e., for which prices, technology A is cheaper)?

Reference no: EM13223115

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