Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
Studied by 0 people
View linked note
Call with Kai
Learn
Practice Test
Spaced Repetition
Match
Flashcards
Knowt Play1/7
There's no tags or description
Looks like no tags are added yet.
Name | Mastery | Learn | Test | Matching | Spaced | Call with Kai |
|---|
No analytics yet
Send a link to your students to track their progress
8 Terms
Marginal Product per Dollar
The additional output produced per dollar spent on an input, calculated as
Marginal Product of Labor (MPL)/Wage Rate (W)
Marginal Product of Capital (MPK)/Rental Rate of Capital (R)
Cost Minimization Rule
Firms minimize costs when the marginal product per dollar is equalized across all inputs, expressed as (MPL/W) = (MPK/R).
Adjusting Input Mix
The process of changing the combination of inputs used by a firm to reduce costs by using more of the input that has a higher marginal product per dollar.
Optimal Combination of Inputs
The ideal mix of labor and capital that allows a firm to produce a given level of output at the lowest possible cost.
Marginal Product of Labor (MPL)
The additional output produced by employing one more unit of labor.
Marginal Product of Capital (MPK)
The additional output produced by employing one more unit of capital.
Wage Rate (W)
The cost of employing one unit of labor, typically expressed as a monetary amount per time period.
Rental Rate of Capital (R)
The cost of employing one unit of capital, typically expressed as a monetary amount per time period.
Flashcards (33)