EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 14, Problem 11SP
To determine
Describe the answer based on given cost structure.
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A manager hires labor and rents capital equipment in a very competitive market. Currently the wage rate is $12 per hour and capital is rented at $8 per hour. If the marginal product of labor is 60 units of output per hour and the marginal product of capital is 45 units of output per hour, is the firm using the cost-minimizing combination of labor and capital? If not, should the firm increase or decrease the amount of capital used in its production process?
A manager hires labour and rents capital
equipment in a very competitive market.
Currently the wage rate is $12 per hour and
capital is rented at $8 per hour, whereas the
marginal product of labour is 60 units of output
per hour and the marginal product of capital is
45 units of output per hour. Show if the firm is
using the cost-minimizing combination of
labour and capital and give appropriate advice if
necessary.
True or false and explain
Suppose a firm’s marginal product of labour is MPL = 10/L, where L is measured in labour hours, the price of the product is $600, and the cost per hour of labour is $30. The firm currently employs 150 labour hours. In order to maximize the firm’s profits in the short run, the manager should increase its labour employment by 40 labour hours.
Chapter 14 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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