Let Q = L K. Suppose the firm seeks to produce a given output while minimizing its

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Let Q = Lα Kβ. Suppose the firm seeks to produce a given output while minimizing its total input cost: TC = PLL + PKK. Show that the optimal quantities of labor and capital satisfy L/K = (α/β)(PK/PL). Provide an intuitive explanation for this result.

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Managerial economics

ISBN: 978-1118041581

7th edition

Authors: william f. samuelson stephen g. marks

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