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Isocost-Isoquant - Assignment Example

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In the above Isocost-Isoquant it can be observed that as one move from the left to the right the marginal returns using the same ratio of labour and capital gradually decreases. …
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Isocost-Isoquant
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ECO3101: Homework Set #3 Section Production MPC Capital 90,000 80,000 70,000 60,000 50,000
40,000
30,000
20,000
10,000 L1 L2 L3 L4 L5 Labour (MPL)
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In the above Isocost-Isoquant it can be observed that as one move from the left to the right the marginal returns using the same ratio of labour and capital gradually decreases. At point L1, the amount of capital used is very high while the labour is low. Similarly, at point L5 the amount of capital is lowest while the level of labour is highest. The optimum profit maximisation level in the isoquant-isocost graph is point L4, which is 50,000 capitals, and 96 labourers (Oyer, 2006).
Section 2: Perfect Competition
Given that the MC=2 + 4 and = 2 + 2, the total cost may be obtained by integrating the MC. T.C=2Q+2Q2
Fixed cost= T.C-A.V.C
F.C= (2Q+2Q2)-(2 + 2 Read More
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