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A manufacturing firm's production function is Q = KL + K +L. For this production function, MPL = K + 1 and MPK = L + 1.

A manufacturing firm’s production function is Q = KL + K +L. For this production
function, MPL = K + 1 and MPK = L + 1. Suppose that the price r of capital services is
equal to 1, and let w denote price of the labour services. If the firm is required to produce 5
units of output, for what values of w would a cost-minimizing firm use
a) only labour?
b) only capital?
c) both labour and capital?

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A manufacturing firm’s production function is Q = KL + K +L. For this production
function, MPL = K + 1 and MPK = L + 1. Suppose that the price r of capital services is
equal to 1, and let w...

Sign up to view the full answer

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