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Assume the wage rate is w=$2, and the rental rate of capital is r=$7. The marginal...

Assume the wage rate is w=$2, and the rental rate of capital is r=$7. The marginal product of labor is MPL=30, and the marginal product of capital is MPK=90. If the firm wishes to minimize its production costs, and continue to produce the same level of output, it should:

a) increase capital, reduce labor

b) increase labor, reduce capital

c) do nothing

d) increase both capital and labor

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Answer #1

The lost minimize Condition be MP w M Pk r Here = 30 & w MPL M Pv role ão r $333 WA r M PL MPK > W r which increased mean it

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