Economics question help?

Posted on 2014-12-02 13:36:00 in Economics by CHRISTOPHER

A bicycle is assembled out of bicycle frame and two wheels.

a) Write down a production function of a firm that produces bicycles out of frames and wheels. No assembly is required by the firm, so labour is not an input in this case.

b) Suppose that initially the price of a frame is $100 and price of a wheel is $50. Show the choices of frames and wheels that minimize the cost of producing 100 bicycles, and draw the isocost line through the optimal basket. Repeat the exercise if the price of a frame rises to $200, while the price of a wheel remains $50

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