what does an optimal mix mean in production theory? In general what do K* and L*...

what does an optimal mix mean in production theory? In general what do K* and L* indicate( that is what do these number or function mean)?

Expert Solution

An Optimal Mix in production theory means that combination of inputs which maximises the output, given the cost incurred by the firm. It means that at the optimal mix level, the inputs used for production of goods and services, maximise output while staying inside the cost structure of the firm.

K* means the unit of input K, generally used to denote Capital, at the optimal mix level of inputs.

L* means the unit of input L, generally used to denote Labour/Labourers, at the optinal mix level of inputs.

K*L* togther denote the optimal mix of the production theory.

Rahul Sunny answered 2 years ago

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