Question

The ________-________ rule of production states that the cost of producing any given level of output is minimized when the marginal product per dollar spent on a resource is equal for all resources used in production.

Answer 1

The marginal productivity rule states that the cost of producing any given level of output is minimized when the marginal product per dollar spent on a resource is equal for all resources used in production.

Step-by-step explanation:

The production rule you are referring to is called the marginal productivity rule of production. According to this rule, the cost of producing any given level of output is minimized when the marginal product per dollar spent on a resource is equal for all resources used in production.

For example, let's say a company produces widgets and uses both labor and capital as resources. The company wants to minimize its production costs. The marginal productivity rule suggests that the company should allocate its resources such that the additional output generated by each additional unit of labor or capital is equal to the additional cost incurred to hire that unit.

In other words, if the company can hire one more worker for $20 and that worker produces an additional 10 widgets, the company should only hire that worker if the market price of each widget is $2 or higher. This ensures that the company is getting the most value out of its resources.