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Unformatted text preview: = 8,000, rags bought during the year = 1,000, ladder bought at the beginning of the year = 100. What further information do we need to calculate his economic profit over the past year? 3. (a) Why is the MRTS equal to the ratio of factor prices at the cost-minimising combination of inputs for a given output? (b) What is meant by increasing returns to scale and decreasing returns to scale and why do they arise? (c) Show diagrammatically the effect of a decrease in the wage rate on the firms cost-minimising choice of capital and labour, holding the level of output constant. Key terms to review and understand: Consumer surplus Deadweight loss Expected utility Adverse selection Moral hazard Principal/agent problem Marginal product of labour Isoquant Isocost curve...
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.
- Spring '12