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Production function and technology

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Graph and explain what the effects would be (short run production function) if a new advanced process was discovered. How would the number of workers hired (variable input) change? This is a profit maximizing firm, also explain the profit maximization condition the firm uses.

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Firms use workers and capital to produce output. Workers are hired until profit is maximized which occurs when the marginal productivity of the last worker hired is equal to their real wage. Firms will keep substituting the cheaper input until costs are at the minimum which means profit is maximized. Thus profits are maximized when the extra cost of producing an ...

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