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Marginal Product per Labor Marginal Product per Capital A manufacturer is hiring

Marginal Product per Labor, Marginal Product per Capital

A manufacturer is hiring 20 units of labor and 6 units of
capital (bundleA) The price of labor is $10 and the price of capital is $2 and
at A the marginal products of labor and capital are both equal to 20

 

1Beginning at A if the manufacturer increases labor by 1
unit and decreases capital by 1 unit, what will happen to cost and output?

 

Cost remain constant & output rises by 20 units

Cost remain constant & output lowers by 20 units

Output remains constant & cost increase by $8

Output remains constant & cost lowers by $8

Both cost and output remain constant

 

2Beginning at A, if the manufacturer raises expenses on
labor by $1 and lowers expenses on capital by $1, which is True?

 

Output per $ spent will rise

Output per $ spent will lower

MP of labor will eventually rise and MP of capital will
eventually fall

MP of labor will eventually rise and MP of capital will
remain constant

Or none of these

 

3The manufacturer

 

is using optimal combination of capital and labor

should use more labor and less capital

should use more capital and less labor

need more information to determine

 

4In equilibrium

 

MPL will be less than 20

MPK will be more than 20

MPK=MPL

MPL will be 5 times MPK

Mar 17 2020 View more View Less

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