Assume that a firm is using the cost-minimizing combination of its only 2 inputs, capital and labor. If the price of a unit of capital is $200 and the price of a unit of labor is $50, what is the MPL of the last unit of labor if the marginal product of the last unit of capital is 2,000?

Assume that a firm is using the cost-minimizing combination of its only 2 inputs, capital and labor. If the price of a unit of capital is $200 and the price of a unit of labor is $50, what is the MPL of the last unit of labor if the marginal product of the last unit of capital is 2,000?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 6P

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

Question

• Assume that a firm is using the cost-minimizing combination of
its only 2 inputs, capital and labor. If the price of a unit of capital
is $200 and the price of a unit of labor is $50, what is the MPL of
the last unit of labor if the marginal product of the last unit of
capital is 2,000?

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