Q&A: How do producers decide on the best combinations of resources to use?

Friday, June 25, 2010
By admin
Producers Resources
by Ron Sombilon Gallery

Question by twistin403: How do producers decide on the best combinations of resources to use?
Please answer in Economics!

Best answer:

Answer by Zehra M
they calculate the return of each factor of production and then whichever gives the highest return is used…

for example if by employing 5 labour they are able to produce 10 units during an hour, this mean that the MPP of labour is 2 units… if during the same time of 1 hour 1 machine is able to process 15 pieces this means that the MPP of capital of 15… which is way better than that of labour…

another factor is the costs of these factors of production is labour becomes cheaper than capital then more of labour will be used…

also if productivity of capital increases then more output would be produced using capital instead of labour as it is producing more…

moreover if the government grants subsidies to producers for capital equipment then production by capital means would increase.

Know better? Leave your own answer in the comments!

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One Response to “Q&A: How do producers decide on the best combinations of resources to use?”

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