« previous next »

Author Question: If the firm is using only one variable input, explain why the condition W = MRPL is thesame ... (Read 27 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?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Did you know?

Green tea is able to stop the scent of garlic or onion from causing bad breath.

Did you know?

If you use artificial sweeteners, such as cyclamates, your eyes may be more sensitive to light. Other factors that will make your eyes more sensitive to light include use of antibiotics, oral contraceptives, hypertension medications, diuretics, and antidiabetic medications.

Did you know?

The tallest man ever known was Robert Wadlow, an American, who reached the height of 8 feet 11 inches. He died at age 26 years from an infection caused by the immense weight of his body (491 pounds) and the stress on his leg bones and muscles.

Did you know?

Throughout history, plants containing cardiac steroids have been used as heart drugs and as poisons (e.g., in arrows used in combat), emetics, and diuretics.

This modified model of Easton’s systems theory puts government decision makers as the source of pol This modified model of Easton’s systems theory puts government decision makers as the source of pol
Inverse Relation Between IQ and Disease. Could this explain the Flynn effect? Inverse Relation Between IQ and Disease. Could this explain the Flynn effect?
The location of the variable fuel sensor can vary, depending on the make and model of vehicle, but ... The location of the variable fuel sensor can vary, depending on the make and model of vehicle, but ...
Gently squeeze/milk the arm with twisting motion. With oil or lotion on hands, use gentle but firm ... Gently squeeze/milk the arm with twisting motion. With oil or lotion on hands, use gentle but firm ...
Explain how it can be desirable from an intertemporal perspective for a country run a current ... Explain how it can be desirable from an intertemporal perspective for a country run a current ...
Separation of variable number tandem repeat (VNTR) alleles after PCR amplification Separation of variable number tandem repeat (VNTR) alleles after PCR amplification
Video: Coaductile pathway, Timing of contraction signal & Conduction system and ECG

For a complete list of videos, visit our video library