Question

For each of the following examples, draw a representative isoquant. What can you say about the marginal rate of technical substitution in each case?

1. A firm requires exactly two full-time workers to operate each piece of machinery in the factory.

2. A firm can hire only full-time employees to produce its output, or it can hire some combination of full-time and part-time employees. For each full-time worker let go, the firm must hire an increasing number of temporary employees to maintain the same level of output.

3. A firm finds that it can always trade two units of labor for one unit of capital and still keep output constant.

Answer 1