Profit maximization implies that firms will make input choices in a marginal way. Explain why the following marginal rules found in this chapter are specific applications of this general idea:
a. MRL = MEL
b. MPL • MR = MEL = w
c. MVPL = MEL = w
d. MVPL = w
e. MVPL = MEL > w
If firms follow these various rules, will they also be producing a profit-maximizing level of output? That is, will they produce that quantity for which MR = MC? Will they also be minimizing costs if they use these rules? Explain your answers both intuitively and with algebra.