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capital and more labor. Clear my choice mation ag question se the graph below for the following three questions: 14 12 10 8 U
The graph shows units of labor (labeled L) on the horizontal axis, and units of capital (labeled K) on the vertical axis. A b
If the firm changes its labor and capital from point A to point C, Select one: O a. diminishing returns will set in. O b. it
Given the prices of labor and capital and our available budget, our firm can produce output represented by Select one: O a. I
than The labor/capital combination at point B uses the labor/capital combination at point C. Select one: O a. less capital an
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Answer #1

1. b
(As point C also lies on same budget line, so, it will exhaust its budget but produce same output because A and C lies on same IQ.)

2. a
(Optimal bundle is determined where IQ is tangent to the budget line. So, IQ2 only.)

3. c
(At B, less L and more K is used as compared to C and it produces more output because it lies on higher IQ.)

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