When should the firm stop replacing one input for the other

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A firm is producing 1,000 units of output with 40 units of labor and 30 units of capital. The marginal product of the last units of labor and capital are, respectively, MPL = 69 and MPK = 135. The prices of labor and capital are, respectively, w = 30 and r = 85. What should the firm do in order to minimize the cost of producing 1,000 units of output? Should the firm increase capital and decrease labor or the other way around? When should the firm stop replacing one input for the other? Explain.

Reference no: EM13158757

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