« previous next »

Author Question: If the firm is using only one variable input, explain why the condition W = MRPL is thesame ... (Read 57 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?

There are immediate benefits of chiropractic adjustments that are visible via magnetic resonance imaging (MRI). It shows that spinal manipulation therapy is effective in decreasing pain and increasing the gaps between the vertebrae, reducing pressure that leads to pain.

Did you know?

In 1835 it was discovered that a disease of silkworms known as muscardine could be transferred from one silkworm to another, and was caused by a fungus.

Did you know?

No drugs are available to relieve parathyroid disease. Parathyroid disease is caused by a parathyroid tumor, and it needs to be removed by surgery.

Did you know?

The first monoclonal antibodies were made exclusively from mouse cells. Some are now fully human, which means they are likely to be safer and may be more effective than older monoclonal antibodies.

Did you know?

An identified risk factor for osteoporosis is the intake of excessive amounts of vitamin A. Dietary intake of approximately double the recommended daily amount of vitamin A, by women, has been shown to reduce bone mineral density and increase the chances for hip fractures compared with women who consumed the recommended daily amount (or less) of vitamin A.

Betelgeuse is a semiregular variable star Betelgeuse is a semiregular variable star
Psoriasis. This photograph demonstrates the characteristic white skin patches of this condition. Psoriasis. This photograph demonstrates the characteristic white skin patches of this condition.
Cholelithiasis. Common sites of gallstones in the generalized condition. (a) Stones in the hepatic d Cholelithiasis. Common sites of gallstones in the generalized condition. (a) Stones in the hepatic d
Mirror Box Therapy Compared to Mental Visualization and a Control Condition Mirror Box Therapy Compared to Mental Visualization and a Control Condition
Negative feedback control of a regulated variable. Negative feedback control of a regulated variable.
Generation of diversity by variable V-J joining mechanisms Generation of diversity by variable V-J joining mechanisms
Video: Oral Hygiene & Braces Animation

For a complete list of videos, visit our video library