Explanation For cost minimization, Jill has to produce at the point where the marginal product of inputs per unit price of input is same. Jill should produce at the point where the ratio of marginal product of labor (MP L ) to the wage price (w) equals the ratio marginal product of capital (MP K ) to the rent price of capital (r). The condition for cost minimization can be equated as follows: MP L w = MP K r Ratio of marginal product of labor to wage price can be estimated as follows: MP L w = 100 10 = 10 Ratio of marginal product of labor to wage price is 10 pizzas per dollar

Economics (7th Edition) (What's New in Economics)

7th Edition

ISBN: 9780134738321

Author: R. Glenn Hubbard, Anthony Patrick O'Brien

Publisher: PEARSON

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Chapter 11.A, Problem 7PA

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Cost minimization.

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Chapter 11 Solutions

Economics (7th Edition) (What's New in Economics)

Ch. 11.A - Prob. 1RQ Ch. 11.A - Prob. 2RQ Ch. 11.A - Prob. 3RQ Ch. 11.A - Prob. 4PA Ch. 11.A - Prob. 5PA Ch. 11.A - Prob. 6PA Ch. 11.A - Prob. 7PA Ch. 11.A - Prob. 8PA Ch. 11.A - Prob. 9PA Ch. 11.A - Prob. 10PA

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Cost minimization.

Solution Summary: The author explains that for cost minimization, Jill must produce at the point where the ratio of marginal product of labor (MP L) to the wage price is equal.

Cost minimization.

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Chapter 11 Solutions