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Suppose you manage a firm whose marginal product of capital is currently 16 and whose marginal...

Suppose you manage a firm whose marginal product of capital is currently 16 and whose marginal product of labor is currently 5. The rental price of capital is 5, and the wage is 2.

  1. If you want to expand output, should you increase capital or labor? Explain.

  2. If you do what is in part B, which of your numbers are likely to change?

  3. As this process unfolds, what equation will become true?

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