QUESTION 2

In recent years, the use of mobile computing devices in production processes of many types has increased tremendously. New software applications have been created to solve business and engineering problems; at the same time, production of mobile devices has become much more efficient, allowing prices to fall drastically. Suppose a production process uses two inputs: labor (L) and mobile computing devices (K).
a) Draw two isoquans, one on each of the two diagrams provided below, showing how the
development of these mobile devices changed the production options available to many firms.
b) On the same two diagrams, draw a series two isocost curves, one for each diagram, showing how
falling prices of mobile devices changed firms’ options.
c) Show how optimal employment of labor and computers has changed. There should be (clearly
labeled) an original optimal point and a new optimal point. Pay special attention to correctly graphing the changed ratio of inputs which will result in the new optimal. Also, clearly label which isoquants and which isocosts correspond to each optimal.