The fast food company Schnabb uses labor and capital to produce its product. Holding the production fixed, what is the effect of a lower price of capital on the ratio between the number of workers and the amount of capital used? Explain using isocosts and an isoquant.
The fast food company Schnabb uses labor and capital to produce its product. Holding the production fixed, what is the effect of a lower
Profit maximisation is a firm's financial goal. If its total output remains fixed in the near run (due to capacity constraints) and it is a price-taker (unable to fix or alter price on its own as in a completely competitive market), its total income will likewise remain fixed.
The firm's cost, in turn, is determined by two major factors:
(1) The technical relationship between inputs and outputs (that is, how outputs change as inputs change), and
(2) Factor pricing
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