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The following graph shows the firms cost minimizing input choice at current factor prices.

K

100

50
Q= 1,000
0 50 100 L TC = 500

a. What are the current prices of capital and labor, based on the graph?
b. Suppose that the price of labor increases, if the firms wishes to continue to produce the current level of output how will the firms optimal input choice change (relative to its current choice)?

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9481145

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