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Firm A plans to produce 500 units per day of good X.

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Firm A plans to produce 500 units per day of good X. The firm can choose either of the following two input combination t produce 500 units per day.

Process 1 Process 2
Labor 8 12
Capital 14 7

To obtain the services of labor and capital for a day, firm A must pay wages of $100 per unit of labor and $80 per unit of capital. For firm A, process ________ (1, 2) is economically efficient because the efficient process costs $___________ compared with $__________ for the inefficient process. Show your work here:

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Solution Summary

The expert examines the firn A plans to produce 50 units per day of good X.

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Process 1

Labor = 8x100 = 800

Capital = 14 x 80 = 1120

Total = 800+1120 = 1920

Process 2

Labor = 12x100 = ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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