In order to hire the least-cost combination of labor and capital, the firm must do which of the...
Question:
In order to hire the least-cost combination of labor and capital, the firm must do which of the following?
A. Find the combination of labor and capital where the marginal product of labor is equal to the marginal product of capital.
B. Find the combination of labor and capital where the ratio of the marginal product of labor to the marginal product of capital is equal to one.
C. Find the combination of labor and capital where the marginal product of labor divided by the price of labor is equal to the marginal product of capital divided by the price of capital.
D. Find the combination of labor and capital where the price of labor is equal to the price of capital.
E. Find the combination of labor and capital where the marginal revenue product of labor is equal to the marginal revenue product of capital.
Cost Minimization:
The total cost function shows that, for any set of input costs and for any output level, the minimum total cost incurred by the firm is C = C(w, v, y) where w = wage rate, v= rental rate and y= output. For achieving this level of output, the firm needs to equate MRTS to w/v.
Answer and Explanation:
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Cost Function in Calculus: Formula & Examples
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