A firm's marginal product of capital is twice its marginal product of labor; the price of labor is $6, and the price of capital is $3. Is the firm minimizing cost? If not, how can it reduce its cost? Explain.
What will be an ideal response?
Answer:
No, increase capital input
A frim minimize cost when it employs input equal to the per dollar marginal product is equal of the both inputs
means
MPL/MPK=wages/rent
L/2L=6/3 ---------- the equation does not satisfy
0.5 is not equal to 2
so the firm is not minimizing its costs it should increase capital input and decrease labor input to minimize it.
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