Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.

Question

Quizplus · Accepted Answer

This is known as the condition of cost minimization, which states that a firm will produce at the point where the ratio of the marginal product of each input to its price is equal to the ratio of the marginal product of the other input to its price. This helps the firm to minimize its costs and maximize its profits.

Cost Minimization Requires That a Firm Equate the Ratio of Marginal