This topic contains a solution. Click here to go to the answer

Author Question: Suppose there are profit maximizing, competitive buyers and sellers of labor in an industry, and the ... (Read 42 times)

Evvie72

  • Hero Member
  • *****
  • Posts: 519
Suppose there are profit maximizing, competitive buyers and sellers of labor in an industry, and the amount of capital is fixed for each firm. Explain under what condition the output price will equal the wage rate.
 
  What will be an ideal response?

Question 2

If a firm hires one worker and eliminates four units of capital, and hires one more worker and replaces three more units of capital, keeping output constant, then
 
  A) workers and capital are perfect substitutes.
  B) the firm is operating inefficiently because capital is more efficient than workers.
  C) the firm is experiencing a diminishing marginal rate of technical substitution.
  D) there are decreasing returns to scale.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

peter

  • Sr. Member
  • ****
  • Posts: 330
Answer to Question 1

The profit-maximizing buyer of labor sets the output price equal to the marginal cost of producing an additional unit of output. The marginal cost of output when capital is fixed equals the wage rate divided by the marginal product of labor. If the marginal product of labor equals one, then the output price will equal the wage rate.

Answer to Question 2

C




Evvie72

  • Member
  • Posts: 519
Reply 2 on: Jul 1, 2018
:D TYSM


lindahyatt42

  • Member
  • Posts: 322
Reply 3 on: Yesterday
Great answer, keep it coming :)

 

Did you know?

In 1844, Charles Goodyear obtained the first patent for a rubber condom.

Did you know?

The human body produces and destroys 15 million blood cells every second.

Did you know?

Oxytocin is recommended only for pregnancies that have a medical reason for inducing labor (such as eclampsia) and is not recommended for elective procedures or for making the birthing process more convenient.

Did you know?

Earwax has antimicrobial properties that reduce the viability of bacteria and fungus in the human ear.

Did you know?

A good example of polar molecules can be understood when trying to make a cake. If water and oil are required, they will not mix together. If you put them into a measuring cup, the oil will rise to the top while the water remains on the bottom.

For a complete list of videos, visit our video library