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Social Science Clinic => Economics => Topic started by: lindiwe on Apr 19, 2019

Title: A firm produces 5 units of output from the last dollar it spends on labor and 10 units from the last ...
Post by: lindiwe on Apr 19, 2019

Question 1

A firm is operating such that the marginal product of labor is 10 and the marginal product of capital is 20. The firm is minimizing its costs only if

◦ the wage is half the rental rate.
◦ the rental rate is half the wage.
◦ since capital is more productive than labor, the firm must be minimizing cost.
◦ Given this information the firm can't be minimizing cost under any circumstances.

Question 2

A firm produces 5 units of output from the last dollar it spends on labor and 10 units from the last dollar spent on capital. The firm should

◦ employ more labor and less capital.
◦ employ more capital and less labor.
◦ employ more capital and labor.
◦ employ less capital and labor.

Title: A firm produces 5 units of output from the last dollar it spends on labor and 10 units from the last ...
Post by: samiel-sayed on Apr 19, 2019

Answer 1

the wage is half the rental rate.

Answer 2

employ more capital and less labor.

Title: A firm produces 5 units of output from the last dollar it spends on labor and 10 units from the last ...
Post by: lindiwe on Apr 19, 2019

Thanks

Title: A firm produces 5 units of output from the last dollar it spends on labor and 10 units from the last ...
Post by: samiel-sayed on Apr 19, 2019

Welcome :)