Graphical Investigation

Let us examine the problem graphically, to determine the necessary conditions for optimality.

The accompanying simulation shows the xy-plane, where x denotes units of labor and y the units of equipment. Also shown is the graph of a x+ b y = B, the budget constraint line on which the optimal point must lie. A point in the white region above the line violates the constraint by exceeding the budget. A point in the gray region below the line violates the constraint by not spending enough.
Clicking on the Activate button generates a level curve of the production function, xa yb = P, corresponding to production level P. Sliding the curve changes the production level. Use the simulation to locate the optimal point. Then answer the following question, and write down your response on the accompanying worksheet.


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