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:

                  1222_isocost.png

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

Shifting the ppf curve, Shifting the PPF Curve To raise the manufacturi...

Shifting the PPF Curve To raise the manufacturing of one good without reducing the production of the other, the PPF curve should shift outward. The PPF curve shifts outward as

Describe the price of monopolistic competition, Perfect competition and mon...

Perfect competition and monopoly are rarely found in the real world and thus they do not represent, for the most part, the actual market situations. Therefore, the conclusions whic

Elasticities of demand:, price of laptop increases by 20% and there is a 40...

price of laptop increases by 20% and there is a 40% drop in the quantity demanded?

Incidence tax, If the inverse demand curve is p=120-Q and the marginal cost...

If the inverse demand curve is p=120-Q and the marginal cost is constant at 10, how does charging the monopoly a specific tax of r=10 per unit affect the monopoly optimum and the w

Explain and illustrate, explain and illustrate the changing demand for big ...

explain and illustrate the changing demand for big mac using indefference curve and budget line

ELASTICITY, WHAT ARE THE PRACTICAL IMPORTANCE OF INCOME ELASTICITY OF DEMAN...

WHAT ARE THE PRACTICAL IMPORTANCE OF INCOME ELASTICITY OF DEMAND?

Natural monopoly, Introduction for a natural monopoly assignment

Introduction for a natural monopoly assignment

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

Endowendowment, How to solve questions of endowments?

How to solve questions of endowments?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd