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Rule for cost minimization

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Assume the price of labor (W) equals $10 and the price of capital (C) equals $36. Also suppose that at the current mix of labor and capital, MPL = 5 and MPK = 12. Using the rule for cost minimization, which of the following correctly describes what the firm should do to its labor and capital mix?

a. Increase L and decrease K.

b. Decrease L and increase K.

c. Increase both L and K.

d. L and K should not change.

Reference no: EM132319565

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