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Figure 7.9
-(Figure 7.9) Suppose the firm is producing at point A. If the firm wants to produce more output, it will:

Question

Use the following to answer question:
Figure 7.9 
-(Figure 7.9) Suppose the firm is producing at point A. If the firm wants to produce more output, it will:

Quizplus · Accepted Answer

As the firm is already producing at point A, it can only produce more in the short run by increasing the variable input, which is labor. This will cause the production function to shift upward, and the firm will move to a new point on the isoquant curve passing through point A. In the short run, the firm will move to point Z where it can produce more output by employing more labor. However, in the long run, the firm can also increase its capital stock and shift the isoquant curve further upward, reaching point W where it can produce the desired level of output with less labor. Therefore, the firm will move to point Z in the short run and point W in the long run.

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