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The Cost Minimizing Input Choice
- Assumptions
- R = depreciation rate + interest rate
- Question
* The Isocost Line
- C = wL + rK
- Isocost: A line which shows all the combinations of L & K which can be purchased for same cost
- Rewriting C as linear:
is the ratio of wage rate to rental cost of capital.
* This shows the rate at which capital can be substituted for labor with no change in cost.
describe returns to scale and give examples of each.
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social welfare ordinal
#i need a project on this title
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Where minimum efficient scale is very huge for capital intensive operations, it may be more cost effective to allow one company to spread its fixed costs over a very huge number of
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