Author Question: Suppose labor and capital are variable inputs. The wage rate is 20 per hour, the marginal product of ... (Read 55 times)

ec501234 · **on:** Jul 1, 2018

Suppose labor and capital are variable inputs. The wage rate is 20 per hour, the marginal product of labor is 30 units, the rental rate of capital is 100 per machine hour, and the marginal product of capital is 150 units.

If the wage rate declines to 15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what happens to the amount of capital used by the firm? A) Decreases
B) Increases
C) No change
D) We do not have enough information to answer this question.

Question 2

When a product transformation curve for a firm is bowed inward, there are ________ in production.

A) economies of scope
B) economies of scale
C) diseconomies of scope
D) diseconomies of scale