Substitution for perfect complements

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A firm has inventory of second-generation chips for $100,000 based on their price a year ago. Since then, third-generation chips have been introduced in the market and the price of the old chips has been reduced by 10%. What is the opportunity cost of holding the inventory of the old chips today? Explain.

Company ABC uses two inputs, labour and capital, in its production process. Prices for these inputs are $11 per hour and $33 per unit for labour and capital, respectively. The marginal products of the two inputs are 24 for labour and 48 for capital, given the current amount of inputs. Is the firm using the cost-minimizing combination of labor and capital? If not, should ABC hire more or less labour?

Explain why we say that the marginal rate of substitution for perfect complements is zero.

If the price elasticity of demand for lamps is -1.2, how should the LampShop Co. change its price in order to raise its revenue? Explain.

Reference no: EM133083063

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