A fashion firm makes outfits using two inputs, design skills( L) and expensive materials (M). The cost of fabrication is small and may be ignored as a first approximation. At current output levels, the unit input costs are: CL =£20 and CM =£4. The marginal products are: MPL =50: MPM =8.
Is the firm operating efficiently i.e. is it producing the current output at minimum cost? If not what changes should it make?
No, at these rates the firm is not operating efficiently. For producing ...
The Cost of Production is examined.