Cost minimizing input choice, Microeconomics

Assignment Help:

The Cost Minimizing Input Choice

- Assumptions

Two Inputs: Labor (L) & capital (K)
Price of labor: wage rate (w)
The capital price

- R = depreciation rate + interest rate

- Question

If capital was rented, would it change the value of r?

* 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:

K = C/r - (w/r)L
Slope of the Isocost:

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.

Related Discussions:- Cost minimizing input choice

Calculate the profit maximising price, Question: (a) Assume a firm ope...

Question: (a) Assume a firm operates in one location but serves on two distinct markets, namely, 1 and 2. The demand functions are: Market 1: P1 = 40 - 0.3 Q1 Market 2:

Labor Economics, Functions

Functions

Microeconomics, compare the concept of MRTS with the MRS and discuss the si...

compare the concept of MRTS with the MRS and discuss the similarities and difference between them?

Demand and supply of education, Normal 0 false false false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Unemployment, Unemployment: Individuals who want to be employed, and are ac...

Unemployment: Individuals who want to be employed, and are actively seeking work, but can't find a job, are considered ‘officially' unemployed. Individuals who aren't working, but

Why it is difficult to achieve macro objectives, Why is it so difficult for...

Why is it so difficult for government to achieve all macro objectives simultaneously? Specifically showing possible trade-offs i.e. a) Stimulatory policies which enhance AD

Microenconomics 3, Output 0 Fixed cost $100 Varaible Cost 40 what is the T...

Output 0 Fixed cost $100 Varaible Cost 40 what is the Total cost and Total revenue also the Profit/Loss

Is economic development is based on goverment, Is economic development is b...

Is economic development is based on goverment Many governments--mainly unelected governments-aren't that interested in economic development. Giving valuable industrial franchis

National income accounting, National income accounting: Final Goods: ...

National income accounting: Final Goods: Final goods are goods and services which are being purchased for final use and not for resale or further processing or manufacturing

Rational producer, would a rational producer be concerned with the average ...

would a rational producer be concerned with the average or marginal product of an input in dec

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages