Assume that a firm has the production function that is illustrated by the isoquant map in Figure 3.Q1, below, and that it can buy input L at £20 a unit and input K at £ 15 a unit. (i) What is the...

Assume that a firm has the production function that is illustrated by the isoquant map in Figure 3.Q1, below, and that it can buy input L at £20 a unit and input K at £ 15 a unit.

(i) What is the cheapest method of producing 100 units of output?

(ii) If the firm increased output from 100 to 200 units by adjusting boThK and L to their optimal values would the LAC schedule rise or fall?

(iii) If the firm expanded output from 100 to 200 units in the short-run, wiThK fixed at the optimal level of K for producing 100 units, what would happen to average production costs?

(iv) If the firm decreased output from 200 to 100 units in the short-run, wiThK fixed at the optimal level of K for producing 200 units, what would happen to average production costs?

(v) Using your answers to (i) to (iv) plot the approximate shape of this firm's LAC and relevant SAC schedules.