Suppose a furniture manufacturer finds that the marginal rate of technical substitution of capital for labor...

Suppose a furniture manufacturer finds that the marginal rate of technical substitution of capital for labor in his production process is significantly less than the ratio of the rental rate on machinery to the wage rate for assembly-line labor.

a. Draw a graph representing the current state of the manufacturer.

b. Define the cost minimization rule for the manufacturer.

c. How should he change his use of capital and labor to minimize the cost of production? Show your answer in the same graph in question (a).

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Expert Solution

Rahul Sunny answered 1 year ago

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