1. Business
  2. Economics
  3. 1 use the following information to answer the next three...

Question: 1 use the following information to answer the next three...

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1. Use the following information to answer the next three questions: Widgets Inc. can hire workers at $40 per day and can rent a unit of equipment for $10 per day. Currently Widgets Inc. spends $200 per day on input

a- Draw an isocost curve above for Widgets Inc. spending $200. (label the intercepts)

b- What is the slope of the isocost curve?

c- If Widgets Inc. hires 4 workers and rents 4 pieces of equipment, then the marginal product of labor = 20 and the marginal product of capital = 10. Given this information, is Widgets Inc. optimizing? If not, then what should they do?

2. Currently Moe’s hires 2 employees, has 1 grill (capital), and produces 20 meals per day. If Moe’s decides to double both inputs (employees and grills). If Moe’s experiences decreasing returns to scale how many meals do you expect to produce after inputs double?

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