Suppose you are the production manager for Widgets, Inc. Your job is to produce

Question

Suppose you are the production manager for Widgets, Inc. Your job is to produce a fixed amount of output at the lowest cost possible. When you take over the position, you find that the price paid for a unit of labor is $20 (W = $20), and the price paid for a unit of capital is $50 (R = $50). You also discover that with the current mix of capital (K) and labor (L), the marginal product of labor is 10 (MPL = 10) and the marginal product of capital is 20 (MPK = 20). Is your company minimizing cost? If not, how could you change inputs to do so? Use a diagram to help explain your answer.

Explanation / Answer

no company is not minimizing the cost its remains same. we can do so by minimizing the MPk from 20 to 10 then it can be minimised. and if it seems that the product is suffering from loss then it can be raised.

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