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A fashion firm manufactures outfits using two inputs, design skills (L) and expensive materials (M). The cost of fabrication is small and might be ignored as a first approximation. At current output levels, the unit input costs are: CL =£20 and CM =£4. The marginal products are: MPL =50: MPM =8.
Is the firm operating efficiently i.e. is it producing the current output at minimum cost? If not what changes should it make?
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