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    The Cost of Production

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    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?

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    No, at these rates the firm is not operating efficiently. For producing ...

    Solution Summary

    The Cost of Production is examined.