Suppose There Are Different Ways of Producing Computer Chips

question 10

Essay

Suppose there are different ways of producing computer chips.If you hire one worker (for the day) for each machine that you rent (for the day), you can produce 10 chips per day with each worker/machine pair for the first 60 machine/worker pairs.For the next 60 worker/machine pairs (assuming still that you hire them as pairs for the day), you are able to produce 20 chips per day with each of the additional pairs.Once you have 120 worker/machine pairs, you can only get 5 additional chips per day for each additional pair.But hiring 1 worker for each machine is not the only way to produce computer chips.Suppose you are starting from a production plan where you are using exactly as many workers as machines to produce a given level of chips.The technology is such that, starting at the production plan where you are using the same number of workers as machines, you can replace 1 or more workers with two machines (for each worker) and get just as many chips produced.Alternatively (and again starting at the production plan where you use exactly as many workers as machines), you can replace 1 or more machines with 2 workers (for each machine) and get just as many chips produced.
a.On the template below, illustrate all the different ways that 600 chips can be produced per day.(Hint: The isoquant you should draw is composed of two line segments.)
b.On the same graph, illustrate the different ways of producing 400 chips and the different ways of producing 1,800 chips.(Label each isoquant with the relevant output quantity).
c.Is this production technology homothetic?
d.If machines cost $100 per day, for what range of daily wages will you decide to use exactly as many workers as machines?
e.Suppose both machines and workers cost $100 per day.Illustrate the long run cost curve for this firm.f.Illustrate the long-run marginal and average cost curves.

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