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In: Economics

Suppose a firm purchases capital and labor in competitive markets at prices of r=6 and w=8,...

Suppose a firm purchases capital and labor in competitive markets at prices of r=6 and w=8, respectively. With the firm's current input mix, the marginal product of capital is 7 and the marginal product of labor is 10. Is this firm minimizing its costs? If so, explain how you know. If not, explain what the firm ought to do.

b. How can a firm stay in business if it makes no economic profit in the long run? Explain.

c. When is it optimal for a firm to shut down? Explain the circumstances and time horizon relating to this decision.

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Rahul Sunny answered 2 years ago
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