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

Production function, firm''s product sells for Rs.200 per unit in a highly ...

firm''s product sells for Rs.200 per unit in a highly competitive market. The firm produces output using capital (which it rents at Rs.7500 per hour) and labor (which is paid a wag

Government production in the economy, Government Production: Some productio...

Government Production: Some production in the economy is undertaken directly by governments (or several kinds of government agencies) in order to meet public requirements (as disti

Indifference curve, Jane receives utility from days spent travelling on vac...

Jane receives utility from days spent travelling on vacation domestically(D) and days

Perfect competition, At a market price of $21 a toy, what quantity does the...

At a market price of $21 a toy, what quantity does the firm produce in the short run and does the firm make a positive economic profit, a zero economic profit, or an economic loss?

Define average total cost and average variable cost, Define Average Total C...

Define Average Total Cost and Average Variable Cost Average Total Cost: The amount spent on producing every unit of output. The average cost is calculated by dividing the t

Trade, Ask question #Minim1. what items should be put on the agenda of a ne...

Ask question #Minim1. what items should be put on the agenda of a new round of trade talks (and who wants these on the agenda), 2. why, and 3. the problems likely to be met in the

Oligopoly, stackelberg,bertnart,cournet about oligopoly

stackelberg,bertnart,cournet about oligopoly

Consumer demand analysis "utility", how does utility figure in the analysis...

how does utility figure in the analysis of consumer demand

Programming and input-output models, Normal 0 false false f...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

TYPES OF POLLUTANTS , TYPES OF POLLUTANTS In general the air pollutants c...

TYPES OF POLLUTANTS In general the air pollutants can be sub divided into 2 catexampleories: Primary pollutants and Secondary pollutants Primary pollutants These are the poll

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages