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

Determine the exchange table, Suppose an economy has four sectors, Agricult...

Suppose an economy has four sectors, Agriculture (A), Energy (E), Manufacturing (M), and Transportation (T). Sector A sells 10% of its output to E and 25% to M and retains the rest

Theory of consumer behavior, THEORY OF CONSUMER BEHAVIOR: It is genera...

THEORY OF CONSUMER BEHAVIOR: It is generally observed that market aggregate demand curve for a commodity is downward sloping, given other things. Our problem is to investigate

.theory of supply, explain the concept of producers'' equilibrium

explain the concept of producers'' equilibrium

Real business cycles, REAL BUSINESS CYCLES: The extent of this module ...

REAL BUSINESS CYCLES: The extent of this module is partly indicated in the title. It is about real business cycle (RBC) theory. In addition, it exposes you to New Classical Bu

Environmental scan and swot analysis, Environmental Scan SWOT analysis:...

Environmental Scan SWOT analysis: SWOT analysis will help to describe about the strengths, weakness, opportunities as well as threats. This is the strategic planning method

Law of diminishing marginal utility, assignment

assignment

Vitamin a, 1) Vitamin A Vitamin A has been chosen as the vitamin to be incl...

1) Vitamin A Vitamin A has been chosen as the vitamin to be included in the supplement since it has a role in several functions some of which as follows: 1. Helps in proper vision.

Perfectly competitive market, Perfectly Competitive Markets * Character...

Perfectly Competitive Markets * Characteristics of Perfectly Competitive Markets 1. Price taking 2. Product homogeneity 3. Free entry and exit * Price Taking

Herfendahl index, #qu3. An industry is composed of 20 firms, all with equal...

#qu3. An industry is composed of 20 firms, all with equal sales. The Herfendahl Index ratio in this industry is a. 1000 b. 500 c. 800 d. This cannot be determined from the informat

Consumer choice, Consumer Choice * Consumers choose a combination of g...

Consumer Choice * Consumers choose a combination of goods which will maximize satisfaction they can attain, given the some degree of budget available to them. * The maximiz

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages