The move from A to B shows that the effluent fee emphasizes the greater use of capital 3500 machine-hours and less production of wastewater 5000 gallons and pay only $50,000 fee rather than $100,000 if firm maintain at A.An effluent fee is a per-unit fee that the steel firm must pay for the effluent that goes into the river.
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32 of 43Cost Minimization: The Expansion Path and Long-Run CostsThe firm can hire labor L at w = $10/hour and rent a unit of capital K for r = $20/hour. Given these input costs, we have drawn three of the firm’s isocost lines. Each isocost line is given by the following equation:C = ($10/hour)(L) + ($20/hour)(K)The expansion path is a straight line with a slope equal to∆K/∆L = (50 –25)/(100 –50) = 12●expansion path Curve passing through points of tangency between a firm’s isocost lines and its isoquants. Represent a firm combinations of labor and capital to minimize costs at each output level.