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<br />. <br /> <br />output (X). In addition, he receives compensation for production equal <br /> <br />. <br /> <br />to the price (P) of output times his output (PX). At the same time, he <br /> <br />~ <br />o <br />en <br />l\J <br /> <br />must pay a price (PW) for use of his input (W). <br /> <br />$ <br /> <br /> <br />or <br />PX <br /> <br />output <br /> <br />. <br /> <br />Px <br /> <br />/Pw <br /> <br />. <br /> <br />. <br /> <br />. <br /> <br />. <br /> <br />W <br /> <br />OIl . 0 hi h oPX oPwW h <br />He W1 maXlnllZe s net return were OW = ow or were <br /> <br />. <br /> <br />oPX <br />ow <br /> <br />= Pw. <br /> <br />This is the principal of marginal return equals ma rginal <br /> <br />cost optimization. Notice also that PX may change if capit'l-l stock (K), . <br /> <br />labor (N), or other resource inputs (L) change, so that his production <br /> <br />function is actual PX (Ko, No, Lo) [stated production given 1som.e level <br /> <br />. <br /> <br />of K, N, and L]. Note, too, that as he applies more water to production, <br /> <br />he obtains succeedingly less output (02pX/ow < 0); that is, he experiences <br /> <br />24 <br /> <br />. <br />