In the short- run, a perfectly competitive firm produces output using capital services [K] (a fixed input) and labor services [L] (a variable input). At its profit-maximizing level of output the marginal product of labor is equal to the average product of labor. (MP = AP) <- both with L's after MP and AP but on the bottom. Thanks in advance
A. What is the relationship between the firm's average variable cost (AVC) and its marginal cost (MC)? Derive the relationship and explain it
B. if the firm has 10 units of capital (K) and rental price (r = interest rate) of each unit of $4 per day, what wil be the firm's profit? Should it remain open in the short-run?