Suppose a firm employs only capital and labor as inputs. Explain how the firm should allocate its inputs in order to maximize profits in a perfectly competitive market
What will be an ideal response?
To maximize profits, the firm should allocate the two inputs so that the marginal revenue product (MRP) of each of the two inputs equals its input price, i.e., the MRP of capital equals the price of capital (cost per unit of service), and the MRP of labor equals the price of labor (wage rates).
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In the expenditure approach to GDP, the largest component is
A) government expenditure on goods and services. B) personal consumption expenditures. C) gross private domestic investment. D) net exports.
Which of the following statements is (are) correct?
a. Relative to some other scientists, economists find it more difficult to conduct experiments. b. Theory and observation are important in economics as well as in other sciences. c. To obtain data, economists often rely upon the natural experiments offered by history. d. All of the above are correct.
Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same
a. (i) and (ii) only b. (i) and (iii) only c. (ii) only d. (i), (ii), and (iii)
A type of corporation that combines the capital raising options and limited liability of a corporation with the federal taxation advantages of a partnership
What will be an ideal response?