Isocost-Isoquant - Assignment Example

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) Source: Author 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