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Question

A firm’s isoquant is given by:    q = LK. Total cost is $200 and W_L = W_K =$1.  

Part A: Mathematically solve for the equilibrium levels of L, K, and q. Show all work.

Part B: Graphically present your findings. Label L, K, q, equilibrium, and endpoints to the total cost curve.

Part C: Briefly discuss the economic forces that drive the firm into equilibrium. Use graph from part B in your discussion.