Which of the following conditions indicate cost minimization,assuming two inputs,labour (L)and capital (K)? A)P_K ∙ MP_K = P_L ∙ MP_L B)MP_L = MP_K C)MP_K/P_K = MP_L/P_L D)MP_K/P_L = MP_L/P_K E)P_K = P_L

Question

Quizplus · Accepted Answer

The condition for cost minimization is that the ratio of the marginal product to the price of each input should be equal, i.e., MP_K/P_K = MP_L/P_L. This ensures that the firm is getting the same marginal benefit per unit of cost from each input.

Which of the Following Conditions Indicate Cost Minimization,assuming Two Inputs,labour