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Suppose the wage rate is $48 per hour and the rental rate of capital is $1 per hour. The firm wants to produce 1000 units
Suppose the wage rate is $48 per hour and the rental rate of capital is $1 per hour. The firm wants to produce 1000 units of output. Output is structured as K 751,25.
a. What is the cost minimizing combination of output?
b. Display this combination graphically with capital on the horizontal axis and be sure to label all curves, axes and points.
c. What is the optimal MRTS between capital and labor? What does this mean?
d. If the MRTS is currently 3 how does the producer return to the optimal MRTS?
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Step: 1
To determine the costminimizing combination of output we need to find the optimal ratio of capital K to labor L that minimizes the cost of producing 1...
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Step: 3
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Managerial Economics and Business Strategy
Authors: Michael R. baye
7th Edition
978-0073375960, 71267441, 73375969, 978-0071267441
