Oil is a very important input in many industries. Increases in the price of
oil will lead profit-maximizing firms to substitute away from oil toward
other factors of production, whenever that is technically possible.
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By rearranging the terms in Equation 8-1 , we can look at the cost-
minimizing condition a bit differently:
The ratio of the marginal products on the left side compares the
contribution to output of the last unit of capital and the last unit of labour.
The right side shows how the cost of an additional unit of capital
MMPPK =
LpK
pL