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Solution 1 a) b) c) d)

Explicit cost Implicit cost Explicit cost Implicit cost

Solution 2 a) Cost minimising firm always choose the level of marginal productivity of all factor should be equal, it means if there is two input labour and capital then cost minimising firms chose the level of capital and labour where the marginal product of labour is equalled to the marginal product of labour. So, on the basis of data given above Marginal product of labour = MPL/w = 100/10 = $10 Marginal product of labour = MPK/r = 4000/500 = $8 Here, MPL is not equalled to the MPK, hence the firm is not profit maximising firm. b) The owner of the firm should here more labour and decrease the level of capital investment in order to find the cost minimization condition. Because the existing $10/worker wage rate is more beneficial than the capital investment. Solution 3 Cost is a money outpouring and it is significant for operation and production processes, yet it must be lowest, it means the cost is defining as the lowest cost occur while operating firm or producing services and goods. There are two kinds of the cost associated with any economic activity, namely explicit cost and implicit cost. Explicit cost is defining as the out of pocket cost or direct cost which burns directly by the producers. Implicit cost on the other hand define as the cost which is not directly measurable f observable, it occurs in the forms of negative externality (air pollution, water pollution, sound pollution etc.). costs are also divided into two-part on the basis of the variability, a cost which varies is the variable cost (all kind of operational cost) not varies is fixed cost (land, machinery etc.). The expert edge is dictated by the proficient utilization of assets that would minimize costs while boosting revenue. In the long-run, all costs are variable, it means the long run is defining as the time period when all the cost become variable. For example, in long run, the establishment of a new firm, renting more land and hardware cost etc. In the short run property or land, hardware and perpetual labour costs are fixed, while raw materials, power and authoritative work costs are variable. In the event that the pizza shop needs to improve benefit, it ought to turn into a minimal result of work and capital. On the off chance that the minor result of labour is high, it ought to think about recruiting more labourers. Then again, if the pay rate is high and the peripheral item is diminishing or low, it ought to think about putting resources into mechanization. Once more, if the minimal result of capital is high, it is fitting to put more in hardware. In the event that pizza ovens are leased and income is thought of, unadulterated buying ought to be weighed regardless of whether it implies higher money outpouring since it could be advantageous as far as expanded rental investment funds in the long-run. At this point, Pat’s pizza production is not achieving the condition where his production can achieve minimal condition because there is a loss of $2 while operating in the same condition. In order to make a profit or minimising the cost, Pat should hire more unit of the labourer and forgone some amount of capital investment or decrease the level of capital investment. He can only be profit maximising firm if the marginal product of labour is equalled to the marginal of capital, at this condition Pat will able to get profit in the long run and can be considered as the cost minimising firm....