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You are the manager of a firm that uses two inputs, capital K and labor L, to produce output Q. Suppouse your production function is
You are the manager of a firm that uses two inputs, capital K and labor L, to produce output Q. Suppouse your production function is F so that you can write the quantity produced of output as Q=F(K,L). Let MPK be the marginal product of capital and MPL be the marginal product of labor. Suppose PK and PL are the capital price and labor price, respectively. Assume that MPL PL is less than MPK! Pk. First, explain the meaning of this inequality. Then, explain what the firm should do in order to produce more efficiently? Explain in details your answer in a solid paragraph or two solid paragraphs. a
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