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Explain Why in the Long Run a Firm That Is

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Essay

Explain why in the long run a firm that is cost minimizing will choose K and L where:
w/MPL = r/MPK
What does this tell you about the marginal cost of increasing output through hiring labor and the marginal cost of increasing output through adding capital?


Definitions:

Optimal R&D

The most efficient allocation of resources towards research and development activities to maximize innovation and return on investment.

Expenditures

The act of spending money or utilizing resources for various purposes, including paying for goods, services, or obligations.

Expected-Rate-Of-Return

The forecasted percentage gain or loss that an investment is anticipated to generate over a specified period.

Average Total Cost

the cost per unit is calculated by dividing the entire production cost by the quantity of units produced.

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