1. Suppose the firm is producing where MPL/w < MPK/r.
a) What will it do to reduce cost but maintain the same output? Illustrate and prove.
b) Plot the firm s short run and long run conditional demand curves for labour.
2. Suppose a firm in perfect competition has a cost function given by C(y)=10y2+1000. Derive and plot the short run supply curve for this firm.

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