winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor

with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize,

the method choices are:

Method 1: 50 units of labor, 10 units of capital

Method 2: 20 units of labor, 40 units of capital

Method 3: 10 units of labor, 70 units of capital

If hiring labor for the winter costs $100/unit and a unit of capital costs $400, what is the best production

method? What method should the company use if the cost of labor rises to $200/unit?

Access for free at openstax.org
Perfect Competition

8

FIGURE 8.1 Depending on the competition and prices offered, a soybean farmer may choose to grow a different

crop. (Credit: modification “Agronomist & Farmer Inspecting Weeds” by United Soybean Board/Flickr, CC BY 2.0)

CHAPTER OBJECTIVES

In this chapter, you will learn about:

• Perfect Competition and Why It Matters
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