ECON 208 Chapter Notes - Chapter 8: Profit Maximization, Marginal Product, Dofasco

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ECON 208 Full Course Notes
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ECON 208 Full Course Notes
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Sr = at least one factor is fixed = must adjust the input of the variable factors to produce output. Lr = all factors can be varied = must choose the type and amount of plant and equipment and the size of their labour force. How much capital/labour to use = lr choices = all factors of production are assumed to be variable. Cost minimization: an implication of profit maximization that firms choose the production method that produces any given level of output at the lowest possible cost. Firm should substitute one factor for another as long as the marginal product of the one factor per dollar spent on it is greater than the marginal product of the other factor per dollar spent on it. If these 2 aren"t equal, firm isn"t minimizing costs. K = capital, l = labour, pl and pk = prices per unit of the 2 factors; cost minimization occurs when.

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