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    Marginal Product per Labor, Marginal Product per Capital

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    This is a 4 part question:

    A manufacturer is hiring 20 units of labor and 6 units of capital (bundleA). The price of labor is $10 and the price of capital is $2 and at A the marginal products of labor and capital are both equal to 20.

    1.Beginning at A if the manufacturer increases labor by 1 unit and decreases capital by 1 unit, what will happen to cost and output?

    Cost remain constant & output rises by 20 units
    Cost remain constant & output lowers by 20 units
    Output remains constant & cost increase by $8
    Output remains constant & cost lowers by $8
    Both cost and output remain constant

    2.Beginning at A, if the manufacturer raises expenses on labor by $1 and lowers expenses on capital by $1, which is True?

    Output per $ spent will rise
    Output per $ spent will lower
    MP of labor will eventually rise and MP of capital will eventually fall
    MP of labor will eventually rise and MP of capital will remain constant
    Or none of these

    3.The manufacturer

    is using optimal combination of capital and labor
    should use more labor and less capital
    should use more capital and less labor
    need more information to determine

    4.In equilibrium

    MPL will be less than 20
    MPK will be more than 20
    MPK=MPL
    MPL will be 5 times MPK
    Or the first 2 listed above

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    https://brainmass.com/economics/general-equilibrium/marginal-product-per-labor-marginal-product-per-capital-47424

    Solution Preview

    Total Cost of Labor = 20 × $10 = $200
    Total Cost of Capital = 6 × $2 = $12

    Total Cost = $212

    1)Beginning at A if the manufacturer increases labor by 1 unit and decreases capital by 1 unit, what will happen to cost and output?

    Total Cost of Labor = 21 × $10 = $210
    Total Cost of Capital = 5 × $2 = $10

    Total Cost = $220

    Since 1 unit of Labor is exchanged for 1 unit of Capital, and since the MP of labor = 20, and MP of Capital = 20, then the MP of both labor and capital would remain unchanged, while cost would increase by ...

    Solution Summary

    This is a step by step solution that calculates the effect of different combinations of labor and capital on cost and output.
    The solution addresses the question starting with: A manufacturer is hiring 20 units of labor and 6 units of capital (bundleA). The price of labor is $10 and the price of capital is $2 and at A the marginal products of labor and capital are both equal to 20.

    $2.19

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