MMPA 508 Economics

Questions1. This question will involve using the equation for the isocost line to calculate a setof plot points for an isocost line. Use the prices (pLandpK) and expenditure levels(E1andE2) from the Parameter table, calculate two sets of points for two isocost lines(in the Table of plot points) for the range ofqLshown in the table. Each set of plotpoints is for an isocost curve (IE1andIE2). Note, if you calculate a negative number,leave it blank.12. Add the isocost linesIE1andIE2to the chart. Note:qLis on the horizontal axis.(See the article in Tool #1 on how to add data to an existing chart.)3. This question refers to the production function below the Parameter table - in theformYn=A(qcLqdK).  Rearrange this function, using the relevant numbers (A,c,d)from the Parameter table, to get an isoquant curve equation (i.e.qK=. . .).4. This question will involve using the equation for the isoquant curveand a given levelof output to calculate a set of plot points. Using the given level of output indicated(Y1), calculate a set of points (in the Table of plot points) for the rangeofqLshownin the table. Note, the formula for the first point whereqL>0 for the isoquant curvehas been entered in the table.5. Plot the isoquant curve using the plot points calculated in the question above (as ascatter chart with a smooth line). (I.e. update/add the IQ data series in your chart.)6. Based on your table and chart, state the cost-minimising production plan,q∗L, q∗K(i.e.  a pair ofqL, qKvalues).  Note: the equation for the isoquant can be used tocalculateq∗Kas a function ofq∗L. In the spreadsheet, if you enter a value forqLin cellB56, the corresponding value forqKwill be calculated automatically in cell B57.7. Explain why the production plan you have identified above is cost-minimising. Statethe firm’s level of expenditure/cost to produce the given level of output indicated (Y1).(Hint: refer to slide 34, week 4 notes.)