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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.
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Fill in the column of marginal products. What pattern do you see? How might you explain it? b. A worker costs $30 per day and the ''Firm has fixed costs of $10. Use this informat
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