Answer on Economics of Enterprise Question for Grace Ferguson
MPK = PK
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task of building a bridge. It must now do so at the lowest cost possible.
For a firm with N productive inputs, cost minimization requires that:
MP(1)/P(1)=MP(2)/P(2)=… MP(n)/P(n). This equation tells us that, to minimize cost, the additional output per dollar spent to employ one additional unit of each input must be the same.
For cost minimization and profit maximization, a firm must employ inputs in quantities such that: MRP(1)/P(1)=MRP(2)/P(2)=…=MRP(n)/P(n)=1. MRP is short for marginal revenue product, which equals to “MR*MC”.
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