This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: A firm is employing capital and labor such that the marginal product of capital is 30 and the ... (Read 54 times)

Metfan725

  • Hero Member
  • *****
  • Posts: 552
on: Jun 29, 2018
A firm is employing capital and labor such that the marginal product of capital is 30 and the marginal product of labor is 10 .
 
  If the price of a unit of capital is 50 and the price of a unit of labor is 10, is the firm minimizing its costs? If not, can you recommend a change for the firm to make in its relative amounts of labor and capital used? Explain.

Question 2

The tax multiplier
 
  A) is negative.
  B) is a measure of how much taxes will fall when income is falling.
  C) is larger in absolute value as compared to the government spending multiplier.
  D) is always less than one.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Pariscourtney

  • Sr. Member
  • ****
  • Posts: 352
Reply #1 on: Jun 29, 2018
Answer to Question 1

No, the firm is not minimizing costs. The slope of its isoquant is -10/30 (-1/3) and the slope of its isocost line is -10/50 (-1/5). In order to minimize costs, the firm needs to produce where these slopes would be equal. In other words, the firm needs to produce where the slope of its isoquant is equal to -1/5 . If the firm was to increase its use of labor or decrease its use of capital, the slope of the isoquant will fall.

Answer to Question 2

A


Metfan725

  • Member
  • Posts: 552
Reply 2 on: Jun 29, 2018
Excellent

ghepp

  • Member
  • Posts: 361
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

If you could remove all of your skin, it would weigh up to 5 pounds.

Did you know?

Asthma occurs in one in 11 children and in one in 12 adults. African Americans and Latinos have a higher risk for developing asthma than other groups.

Did you know?

Before a vaccine is licensed in the USA, the Food and Drug Administration (FDA) reviews it for safety and effectiveness. The CDC then reviews all studies again, as well as the American Academy of Pediatrics and the American Academy of Family Physicians. Every lot of vaccine is tested before administration to the public, and the FDA regularly inspects vaccine manufacturers' facilities.

Did you know?

There are more bacteria in your mouth than there are people in the world.

Did you know?

Blood in the urine can be a sign of a kidney stone, glomerulonephritis, or other kidney problems.

Romanesque capital showing Samson and the lion (13th century). Romanesque capital showing Samson and the lion (13th century).
Rivers Are a Product of Their Watersheds Rivers Are a Product of Their Watersheds
Capital-Biased Technological Change Capital-Biased Technological Change
The Stages of Labor and Birth in a Vaginal Delivery The Stages of Labor and Birth in a Vaginal Delivery
Use the product rule to find derivative Use the product rule to find derivative
Excel hardware is introducing a new product on a new product line of capacity 800 units per ... Excel hardware is introducing a new product on a new product line of capacity 800 units per ...
Video: Transferring genes into plants Animation

For a complete list of videos, visit our video library