labor to minimize the cost of production The question states that the MRTS of capital for labor is greater than r/w. Note that this is different from the MRTSof labor for capital, which is what is used in Chapters 6 and 7. The MRTS of labor for capital equals MP K /MP L . So it follows that MP K /MP L > r/w or, written another way, MP K /r > MP L /w. These two ratios should be equal to minimize cost. Since the manufacturer gets more marginal output per dollar from capital than from labor, she should use more capital and less labor to minimize the cost of production. 6. Why are isocost lines straight lines The isocost line represents all possible combinations of two inputs that maybe purchased fora given total cost. The slope of the isocost line is the negative of the ratio of the input prices. If the input prices are fixed, their ratio is constant and the isocost line is therefore straight. Only if the ratio of the input prices changes as the quantities of the inputs change is the isocost line not straight. 7. Assume that the marginal cost of production is increasing. Can you determine whether the
