A firm is employing capital and labor such that the marginal product of capital is 30 and the marginal product of labor is 10
If the price of a unit of capital is $50 and the price of a unit of labor is $10, is the firm minimizing its costs? If not, can you recommend a change for the firm to make in its relative amounts of labor and capital used? Explain.
No, the firm is not minimizing costs. The slope of its isoquant is -10/30 (-1/3) and the slope of its isocost line is -10/50 (-1/5). In order to minimize costs, the firm needs to produce where these slopes would be equal. In other words, the firm needs to produce where the slope of its isoquant is equal to -1/5 . If the firm was to increase its use of labor or decrease its use of capital, the slope of the isoquant will fall.
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The difference between quantity restrictions and price ceilings as to their effect on the market is that
A) only price ceilings make the market inefficient. B) only quantity restrictions make the market inefficient. C) while some consumers gain from price ceilings, no consumers gain from quantity restrictions. D) while price ceilings are efficient, quantity restrictions are not.
The cheapest way to produce a certain amount of output may vary between the short and long-run because:
a. all inputs can be adjusted in the long run. b. all inputs can be adjusted in the short run. c. input prices are fixed in the short run. d. prices increase over the long-run.
An increase in price will increase supply
a. True b. False Indicate whether the statement is true or false
In the above figure, what is total revenue at the profit-maximizing point?
A. $170 B. $176 C. $126 D. $182