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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.
Banks: A company which accepts deposits and issues new loans. It makes profit by charging more interest for loans than it pays on deposits, and through several service charges. By
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how do I determine the profit-maximizing quantity of a firm for different market prices when only given TFC, TVC, and the market price
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