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

Closesubstitute goods, Closesubstitute goods: The number of closesubstit...

Closesubstitute goods: The number of closesubstitute goods The more substitutes of good has and the more close the substitutes are, the more elastic the demand for the good. Fo

Pension benefits, Pensions: Pension benefits are paid to individuals who ha...

Pensions: Pension benefits are paid to individuals who have retired from active employment, in order to support themselves in last years of their lives. Pension programs can be spo

Aggregate demand and supply diagram, 1- Explain how a policy mix (like the ...

1- Explain how a policy mix (like the one used in 1990s) could help reduced to eliminate the budget deficit without having an adverse effect on the output.   Illustrate your answer

Discretionary fiscal policy, Discretionary Fiscal Policy: Some government t...

Discretionary Fiscal Policy: Some government taxing and spending programs can be adjusted by government in response to changing economic circumstances. These discretionary measures

Tut10, 3. You plan to sell a sunglasses clip that you can attach to a car''...

3. You plan to sell a sunglasses clip that you can attach to a car''s sun visor. You can purchase the goods from a wholesaler at $2 a piece and there is an overhead cost of $500 pe

Economics, What happens when oil eventually runs out?? can''t we just pay ...

What happens when oil eventually runs out?? can''t we just pay doctors and nurses more money?? The unemployed should get off their backsides and get a job??

Finding concavity, my q is dat how can we find mathematically dat a product...

my q is dat how can we find mathematically dat a production function is concave?

Long-run supply of housing , The Long-Run Supply of Housing * Scenario...

The Long-Run Supply of Housing * Scenario 1: Owner-occupied housing - Suburban or rural areas - National market for inputs * Questions - Is this an increasing or co

Market supply of labour, use a graphical illustration to describe briefly w...

use a graphical illustration to describe briefly what the influence of each of the following would be on the market supply of labour on an increase in immigration..

Cells electromotive force, Defining Cells Electromotive Force: The main ob...

Defining Cells Electromotive Force: The main objective of this particular aspect of Physical Chemistry is to examine the relation between free energies and the mechanical energy o

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