Q3) a) isoquant
Q = LK= 121,000
w = 10, r = 1
Graph
K = 121,000/L
B) Slope of isocost line = w/r = 10
C) at cost minimization
MRTS = w/r
MRTS = MPL/MPK = K/L
So at eqm, K/L = 10/1
K = 10L
So from Production function
121000 = 10L2
L* = 110
K* = 10L* = 1100
Graph
.
D) new MRTS = MPL/MPK = √(K/L)
MPL = 2*(√L + √K)*(1/2)*L-1/2
MPK = 2*(√L + √K)*(1/2)*K-1/2
.
At new eqm, MRTS = w/r
√(K/L) = 10
K/L = 100
K = 100L
From Production function
121,000 = (√L + √(100)L )2
√(121,000) = √L + 10√L
110√10 = 11√L
L* = 1000
K* = 100L* = 100,000
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