(a)
Factor market does Mr.T operates.
(a)
Explanation of Solution
Mr. T operates in both labor market and capital market. Mr. T’s decision to hire two new workers at $10 an hour shows the labor market operation. At the same time, his decision to purchase computer at $900 and leasing a computer at $450 shows the capital market operation.
Labor market: Labor market is the market for
Capital market: Capital market is a market where short-term and long-term securities are bought and sold.
(b)
The price of capital equipment.
(b)
Explanation of Solution
Computer is considered as capital and the interest rate is equal to the rental price of the capital. Thus, the price of the capital is $900 and the rented rate of capital is $450.
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