« previous next »

Author Question: If the firm is using only one variable input, explain why the condition W = MRPL is thesame ... (Read 59 times)

Ebrown

  • Hero Member
  • *****
  • Posts: 567
on: Jun 29, 2018
If the firm is using only one variable input, explain why the condition W = MRPL is thesame condition as P = MC.
 
  What will be an ideal response?

Question 2

HK Sweaters, Incorporated employs labor at a wage rate of 12 per hour and rents capital for30 per hour. At its current level of labor and capital, the marginal product of labor is 24 and the marginal product of capital is 60 .
 
  Is the firm currently maximizing profit? Explain.


meganlapinski

  • Sr. Member
  • ****
  • Posts: 333
Reply #1 on: Jun 29, 2018
Answer to Question 1

In both cases, the firm compares costs with potential revenues. As long as the wage equals the marginal revenue product of labor, the additional revenue just covers the additional costs of hiring labor and the firm is maximizing profits. By producing where price equals marginal cost, the firm is producing up to the point where additional costs equal additional revenues.

Answer to Question 2

Yes, the firm is currently maximizing profit. The firm should hire labor and capital such that MPL/PL is equal to MPK/PK. In this case, MPL/PL (2) is equal to MPK/PK (2). Thus, the firm is maximizing profit.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

As many as 20% of Americans have been infected by the fungus known as Histoplasmosis. While most people are asymptomatic or only have slight symptoms, infection can progress to a rapid and potentially fatal superinfection.

Did you know?

Street names for barbiturates include reds, red devils, yellow jackets, blue heavens, Christmas trees, and rainbows. They are commonly referred to as downers.

Did you know?

In the United States, congenital cytomegalovirus causes one child to become disabled almost every hour. CMV is the leading preventable viral cause of development disability in newborns. These disabilities include hearing or vision loss, and cerebral palsy.

Did you know?

The cure for trichomoniasis is easy as long as the patient does not drink alcoholic beverages for 24 hours. Just a single dose of medication is needed to rid the body of the disease. However, without proper precautions, an individual may contract the disease repeatedly. In fact, most people develop trichomoniasis again within three months of their last treatment.

Did you know?

Chronic necrotizing aspergillosis has a slowly progressive process that, unlike invasive aspergillosis, does not spread to other organ systems or the blood vessels. It most often affects middle-aged and elderly individuals, spreading to surrounding tissue in the lungs. The disease often does not respond to conventionally successful treatments, and requires individualized therapies in order to keep it from becoming life-threatening.

The energy input and output of glycolysis. The energy input and output of glycolysis.
Psoriasis. This photograph demonstrates the characteristic white skin patches of this condition. Psoriasis. This photograph demonstrates the characteristic white skin patches of this condition.
Erythroblastosis fetalis. (a) The condition occurs with an RH+ father and RH– mother. (b) First preg Erythroblastosis fetalis. (a) The condition occurs with an RH+ father and RH– mother. (b) First preg
Refraction Through Uniform and Variable Thickness Glasses Refraction Through Uniform and Variable Thickness Glasses
Please explain the different Rf values for xanthophyll’s in paper chromatography compared to ... Please explain the different Rf values for xanthophyll’s in paper chromatography compared to ...
Variable expressivity as shown in flies homozygous for the eyeless mutation in Drosophila Variable expressivity as shown in flies homozygous for the eyeless mutation in Drosophila
Video: Brain Anatomy Animation (Part 2 of 2)

For a complete list of videos, visit our video library