Question

Mad Max's Road Warriors fix potholes in interstate highways. Max's road crews fill potholes using workers and shovels in 1-to-1 correspondence. A worker with 1 shovel can fill 10 potholes in a day. A worker with 2 shovels can sl only fill 10 potholes, as can 2 workers with 1 shovel. a. Using the graph below, draw the isoquants corresponding to filling 20 and 40 potholes a day. b. For a day, if shovels rent for $40, and workers must be paid S120, draw any 2 isocost lines 1. and clearly label the associated cost. If Mad Max has received a state contract to fill 20 potholes, what is the minimum cost at which it can fulfill the contract? c. d. If the cost of renting a shovel suddenly rises to S60, what will happen to the composition of inputs that Mad Max uses to fill potholes? Why?

Answer 1

From the given data, The inputs in production of filling potholer is the shovel (s) and labour (L). The inputs are used in fixed proportion of 1. that is S: L = 1. Therefore, the inputs are perfect complement and are L shaped with the knit in the pint. where S/L = 1. This is given by the production function q = F(S, L) = min S, L The equation of the isoquant for Q = 30 in given as, 30 = min S, L The isoquants in this case are given in the figure 1) Q = 10 2) Q = 20 3) q = 30 \r\n The root of shovel is S5 & cost of labour is S25. The cost function is given as, C = 25L + 5S The isocost linear are given in the figure below. (1) Q = 10 (2) Q = 20 (3) Q = 30 (4) isocost 1