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 MP_K be the marginal product of capital and MP_L be the marginal product of labor. Suppose P_K and P_L are the capital price and labor price, respectively. Assume that MP_L/ P_L is less than MP_K/ P_K. 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.

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Arrangement We are given the disparity of MPLPL MPKPK that is minimal result of work per unit dollar ... View the full answer