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

Choosing output in long run, Choosing Output in Long Run * In long run,...

Choosing Output in Long Run * In long run, a firm can change all its inputs, including size of the plant. * We are taking free entry and free exit. * Accounting

State the example of price and price level, State the example of price and ...

State the example of price and price level Create a basket which contains all the goods sold by a specific store on a specific day. Price of this basket is then a price level -

Economics, What are the factors that producers in the society may take into...

What are the factors that producers in the society may take into consideration when deciding on the what to produce,how to produce and for whom ?

Risk averse, Risk Averse: - A person who prefers certain given income...

Risk Averse: - A person who prefers certain given income to risky income with same expected value. - A person is careful risk averse if they have a diminishing marginal ut

What is my expected benefit?, I am risk averse, and trying to maximize my e...

I am risk averse, and trying to maximize my expected value of c0, 5, where c is my fortune. I have 50.000 in cash, and also art with a value of 200.000 which I keep in my basement.

Chapter four, what is the relation ship between mp,tp,ap

what is the relation ship between mp,tp,ap

Statistics, please can you explainn what "down 0.1 percentage point on the ...

please can you explainn what "down 0.1 percentage point on the quarter means"?

Assignment, is south africa''s economic system now more allocative efficien...

is south africa''s economic system now more allocative efficient

Explain supply of the commodity, The law of supply is that producers will s...

The law of supply is that producers will supply more the higher the price of the commodity. The supply curve is an upward sloping function showing a direct relationship among pric

Inflation, inflation and policies that are used to combat it

inflation and policies that are used to combat it

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages