Question 1 (20 marks] A firm uses labor (L) and machines (K) to produce some output. The cost of labor is $50 per unit and the cost of using a machine is $20. a) Derive an equation for the Isocost line. b) Draw an Isocost line for this firm, showing combinations of labor and machines that have a total cost of $200. Label this line (Ca). Draw another line on the same graph) showing combinations that cost $400. Label this line (C). Be sure to clearly identify the intercepts c) What is the gradient of the Isocost line (c.) and comment on what it intuitively represents. d)Suppose an entrepreneur who is working with Isocost line (C) and is currently using 4 units of labor and 10 units of capital decides to add two additional units of labor. To stay on the same Isocost line, what changes will he have to make in his production process e) Now suppose the cost of labor decreases to 30/unit. Redraw the new Isocost line based on the budget of $200. Clearly identify the slope and intercepts. NOTE: Solve the question on paper and upload the scan/pic to Quiz l'in the Assignments of the lecture tab on LMS before 1:00 pm (PART B): Question 2 (10 Marks] Suppose an economy which is in equilibrium in the Malthusian model, faces an influx of refugees. Use the diagrams discussed in class to analyze what will happen to income capita, population and subsistence wages in the economy. Be sure to comment on whether each of the following will be the same or different in the new equilibrium as compared to before: 1) Income/capita 2) Total population 3)Growth rate of population

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