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Producers Equilibrium or Optimal Combination of Inputs
The analysis of production function has demonstrated that alternative combinations of factors of production that are technically efficient can be used to produce a given level of output. Of these, firm will have to choose that combination of factors that will cost it the least. In this way firm can maximise its profits. Choice of any particular method from a set of technically efficient methods is an economic one and it's based on the prices of factors of production at a specific time.
Firm can maximise its profits either by maximising the level of output for a given cost or by minimising the cost of producing a given output. In either case, factors would have to be used in optimal combination at which the cost of production will be minimum.
There are two ways to determine the least cost combination of factors to produce a given output. Which is,
Mankiw Model of Nominal Rigidities There are two related reasons for which firms do not frequently change prices. First, as we saw in the discussion on menu costs, the cost
How does economic theory contribute to managerial decisions
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prepare a break-even analysis to determine volume required to cover costs with and without a specified profit target and price.
determination of size of firm
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Q. Discovery of new technical know-how? Growth of Technical Know-how: Expansion of an industry may result in the discovery of new technical know-how. As a result of this firm
Concept of Managerial Economics The discipline of managerial economics deals with characteristics of economics and tools of analysis that are used by business enterprises for dec
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