A firm is using 7 units of labor and 100 units of capital to produce 1000 units of goods. At these levels of inputs, the marginal product of labor is 5 and the marginal product of capital is 50. The cost of labor is $15 per unit and the cost of capital is $2 a unit. Is the firm minimizing its costs? If not explain how the firm could save on costs while still producing 1000 units.
A firm is using 7 units of labor and 100 units of capital to produce 1000 units of goods. At these levels of inputs, the marginal product of labor is 5 and the marginal product of capital is 50. The cost of labor is $15 per unit and the cost of capital is $2 a unit. Is the firm minimizing its costs? If not explain how the firm could save on costs while still producing 1000 units.
Chapter8: Production And Costs
Section: Chapter Questions
Problem 13QP
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