A firm's marginal product of capital is twice its marginal product of labor; the price of labor is $6, and the price of capital is $3. Is the firm minimizing cost? If not, how can it reduce its cost? Explain.
What will be an ideal response?
Answer:
No, increase capital input
A frim minimize cost when it employs input equal to the per dollar marginal product is equal of the both inputs
means
MPL/MPK=wages/rent
L/2L=6/3 ---------- the equation does not satisfy
0.5 is not equal to 2
so the firm is not minimizing its costs it should increase capital input and decrease labor input to minimize it.
You might also like to view...
Which of the following is money?
A) credit card B) e-checks C) debit card D) checkable deposit E) checks
An empirical study determines that price exceeds marginal cost at the levels of output of firms in long-run equilibrium in the widget industry. The widget industry may therefore
a. be monopolistically competitive. b. have firms whose goal is sales maximization. c. have firms that act as price leaders. d. All of the above are correct.
The table below shows cost data for a firm that is selling in a purely competitive market.OutputAverage Variable CostAverage Total CostMarginal Cost10$5.00$15.00$3124.0013.004144.7511.506165.759.009209.0012.0014Refer to the above cost chart. The lowest output level on this firm's short-run supply curve is:
A. 16. B. 10. C. 12. D. 20.
To measure core inflation, the BLS excludes ________ from the basket of goods used to calculate the CPI.
A. food and housing B. housing and gasoline C. food, clothing, and housing D. food and gasoline