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Supposed the Isocost line C and Isoquant Q follow: Isoquant: Q(L, K) = KαLβ (2) Isocost:...

Supposed the Isocost line C and Isoquant Q follow:

Isoquant: Q(L, K) = KαLβ (2)

Isocost: C = wL + rK (3)

(a) Assume Q = 100,w = $24,r = $8, find the optimal point A and its corresponding K, L based on α = 0.5, β = 0.4.

(b)Whenα=0.5, β=0.4, calculate Q1 with K=2, L=3 and Q2 with K=4,L=6 and the ratio: S1 =Q2/Q1.

(c)Whenα=0.5, β=0.5, calculate Q3 with K=5, L=6 and Q4 with K = 10, L = 12 and the ratio: S2 = Q4/Q3.

(d) Provide one situation of α,β that would make the S1,S2 larger than 2.

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