K,L Describe the phenomenon of DMR and calc and interp profit-max utilization level of an input and optimal cost min combo

Question 1

DMR

Answer 1

At some point, additional employment (whether labor or capital) will result in smaller levels of output, assuming some other input is fixed.

Question 2

calc and interp profit-max utilization level of an input (aka, optimal combo that minimizes cost)

Answer 2

PRofit max requires a mix of inputs that minimizes cost

Cost minimization leven N productive inputs: MPn/Pn = The additional output from employing one more unit of N

Cost min condition: MPl/Pl=Mpk/Pk

Question 3

Cost min doesnt tell us the quantity of input to use.

Answer 3

To determine the quantity of input to use to max profit, we use MRP Marginal Revenue Product

MRPn/Pn = 1, where MRP = P

Where MRP > P, employ an additional unit