Determine whether it is technically efficient in production

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Specialty Steel has carefully measured production in its new plant to determine whether it is technically efficient in production. It has found that, for its two inputs K and L, it has the following marginal products: MP_K = 12 units and MP_L = 20 units. The inputs are hired in perfectly competitive markets, and the firm faces input costs of P_K = $8.50 and P_L = $11 per unit. You have been hired as a consultant to assist Specialty in increasing profitability. What do you recommend about production planning? Explain. Assuming MP_k and input costs remain constant, at what MP_L will the firm be operating efficiently?

Reference no: EM131094602

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