A firm purchases capital and labor in competitive markets at prices of r = 6 and w = 4, respectively. With the firm’s current input mix, the marginal product of capital is 12 and the marginal product of labor is 18. Is this firm minimizing its costs? If so, explain how you know. If not, explain what the firm ought to do.
Answer to relevant QuestionsA firm with the production function Q = F (K, L) is producing an output level Q* at minimum cost in the long run. How will its short- run marginal cost when K is fixed compare with its short- run marginal cost when L is ...For a firm with the production function Q (K, L) = 3 ln K + 2ln L, find the optimal ratio of capital to labor if the price of capital is 4 and the price of labor is 6.A competitive firm has the cost structure described in the following table. Graph the marginal cost, average variable cost, and average total cost curves. How many units of output will it produce at a market price of 32? ...In the short run, a perfectly competitive firm produces output using capital services (a fixed input) and labor services (a variable input). At its profit-maximizing level of output, the marginal product of labor is equal to ...Why does a profit-maximizing monopolist never produce on an inelastic portion of the demand curve? Would a revenue-maximizing monopolist ever produce on the inelastic portion of the demand curve?
Post your question