27 ew History Bookmarks People Window Help Aplia Student Que

27% ew History Bookmarks People Window Help Aplia: Student Question malkiat.sandhu1-01238ck m/at/servlet/quiz?quiz action takeQuiz&quiz;_probGuid-QNAPCOA80101 2. Derlving the slope of an isoquant The following graph shows the isoquant representing the combinations of capital and labor needed to produce 10 eft-handed can openers. Assume that diminishing marginal returns characterize the total product curve Tool tip: Mouse over the points in the graph to see their coordinates. LABOR |Number ef workers 100 CAPITAL IMachines Using the information provided on the graph, fill in the following table with the changes in capital and labor moving from point E to F and G to H respectively. Capital Change Labor Change Moving from Point.. E to F G to H Increases by Increases by 6 machinesDecreases by 6 machines Decreases by 20 workers 10 workers MacBook Pro F9 20 ood fa F5 F8

Solution

Moving from point E to point H increases the marginal product of of labour (MP of L) and decreases the marginal product of capital (MP of K) . This means that as a firm moves along an iso-quant in this way, it will become necessary to replace workers with machines and keep output at the same level. This tradeoff between labour and capital is called Marginal Rate of Technical Substitution. It is represented by slope of an iso-quant.

Explanation: Here MP of labour increases because as we move from E to H we are sacrificing less amount of labour when we are moving from left to right. It means sacrificing of labour is deccreasing to use extra machine. So therefore marginal product of capital decreasing.

Note that you have found ...... labour decreases. In general an increase in capiatal should increase output , while a decrease in labour should decrease output. Since output remains constant along all pints of iso-quant.

Change in output from changing the amount of capital is MP of capital = +10 (from point E to F)

Change in output from changing the amount of labour is MP of labour = - 3 (from point E to F)

So , del L/del K = 20/6 It means del L * MP of L = del K * MP of K = del Q = 0 , 20*-3 + 6*+10 = -60 +60 = 0