10 Using production indifference curves to determine the lea

10. Using production indifference curves to determine the least-cost combination of inputs You are a department manager in a large web design firm, and you have an assignment to produce a customized website for a client in the next week. Your boss asks you to find the least costly way to produce the website. In order to produce the website, you\'ll need to use computers and programmers. The blue production indifference curve on the following graph shows the combinations of computers and programmers that you can use to create the website in a week 10 $1,200 Budget Line Cost-min budget line Least Cost Combination Production Indifference Curve 0 2 345 678910 LABOR (Number of programmers)

Solution

Answer for Question 10

Production possibility curve is locus of pair of points which tells us that desired output is produced within given time frame using the allocations existing on PPC.

In our case if we use 3 programmers then 4 computers are needed to produce desired output , no other combination would do that.Similarly for same PPC 6 programmers need only 2 computers therefore {3,4} & {6,2} are the correct answers hence option B and Option C are incorrect.

Budget line which touches PPC that point is efficient point for given budget . If our budget is $1200 then budget line runs from (0,4) to (3,0) hence no point of contact.

Therefore with this budget no possibilty of desired production

Option B is correct reply to the boss.

We have following combinations such as computers have to be a whole number therefore possible combinations to check ae (3,4);(4,3);(2,6);(6,2) all will have cost is 2400,2500,2600,3000

Therefore 3 programmers and 4 computers is correct combination for lower cost and total cost is 2400