Sam's Company Produces Output with Labor and Capital

question 113

Essay

Sam's company produces output with labor and capital.At the current quantities of labor and capital,the following information is obtained: the output produced by spending one more dollar on labor exceeds the output produced by spending one more dollar on capital.In the long run,is Sam minimizing costs? If not,explain how capital and labor should change (holding output constant)and how this relates to the MRTS = w/r condition.

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