Question1(C). How to draw the diagram with the total cost and AC after change Qu

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Question1(C). How to draw the diagram with the total cost and AC after change Question 1 Consider a firm which uses labour and capital in the production process. Both factors are variable. It produces its chosen rate of output so as to minimise total costs given the current wage and the interest rate. (a) Suppose that labour and capital are substitutes. Describe the optimal choice of inputs of the firm with a diagram. the capital/labour ratio? Illustrate your answer with a diagram. Draw the total cost and the average cost of the firm as functions of output (b) Suppose that there is an increase in the interest rate. How will this affect (c) Suppose that there are constant returns to scale in the production process. before and after the interest rate increase. (d) Do the prev ious answers change if labour and capital are perfect comple- ments? If so, how? Question 2 Consider a firm which uses labour and capital in the production process. Both factors are variable. The production function is: q = AF(K, L) where A is itut of K and L so as to

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Question1(C). How to draw the diagram with the total cost and AC after change Qu

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