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A firm is producing 1,000 units of output with 40 units of labor and 30 unit of capital. The marginal product of
A firm is producing 1,000 units of output with 40 units of labor and 30 unit of capital. The marginal product of
the last units of labor and capital are, respectively, MPL = 60 and MPK= 120. The prices of labor and capital are, respectively, w = 30 and r =40.
a. At the combination of inputs the MRTS is ___________________ (greater than, less than, equal to) the input price ratio, w/r.
b. The firm can increase_________ by one unit while reducing ___________ by _________ unit(s), and keep output constant. This will reduce cost by $____________.
c. To minimize the cost of producing 1,000 units of output the firm will increase __________ and decrease ___________ until _________ equals ________ or, in other words, _________ equals _________.
