Final answer:
The cost of production is minimized when firms substitute expensive inputs with relatively less expensive inputs and take advantage of economies of scale.
Step-by-step explanation:
The cost of production is minimized when firms try to conserve the use of expensive inputs and substitute them with relatively less expensive inputs. This explains why the demand curve for labor (or any input) slopes down. As the labor input becomes more expensive, firms seek to shift to other inputs. For example, multinational corporations like Coca-Cola or McDonald's tend to use more machinery and fewer workers in high-wage economies, while they use more workers and less machinery in low-wage countries.
In addition, economies of scale play a role in cost minimization. As the quantity of output increases, the cost per unit goes down. This is why larger factories can produce at a lower average cost than smaller factories. For instance, warehouse stores like Costco or Walmart take advantage of economies of scale.