Question

Fullerton’s city council is considering passing a statute that would reduce food manufacturer’s costs of using capital in their production processes. On the evening of the vote, local labor union officials voiced serious objections to this statute. Outline the basis of the argument most likely used by union officials.

To outline the basis of the argument used by the labor union officials, please answer the following two questions:

(1) How would this statute affect the manufacturers’ capital to labor ratio in the long -run? Please also use a diagram that includes both the isocost line and the isoquant curve to explain the situation.

(2) Will there be some job losses due to this statute?

Answer 1

Answer:-

Fullerton’s city council is considering passing a statute that would reduce food manufacturer’s costs of using capital in their production processes. On the evening of the vote, local labor union officials voiced serious objections to this statute.

1)

The staue will affect the capital of the manufacture because if they reduce food manufacturing it will lead to scarity and it will also affetct profit of the firm. In long-run it will also affect the babour by reducing salary and some cn loss their jobs.

ISOCOST LINE

ISOQUANT CURVE:-

2)

Yes,there will be some job losses by this statue becuase if the production reduce automatically the work will be less,so there will be job losses.