Firm XYZ produces specialty widgets using labor and capital. The table below shows the productivity of both resources. The initial cost of a worker is $10 and the cost of capital is $20. Workers Total Product (Labor) Marginal Product of Labor Marginal Product of Labor per dollar W = $10 Marginal Product of Labor per dollar W = $5 Capital Total Product (Capital) Marginal Product of Capital Marginal Product of Capital per dollar P = $20 0 0 - - 0 0 - - 1 500 500 1 1,000 1,000 50 2 900 400 2 1,900 900 45 3 1,200 300 3 2,700 800 40 4 1,400 200 4 3,400 700 35 5 1,500 100 5 4,000 600 30 a. Complete the Marginal Product of Labor per dollar when the wage is $10. b. When the wage is $10 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets? unit(s) of labor and unit(s) of capital. c. Suppose the wage rate falls to $5. Complete the Marginal Product of Labor per dollar when the wage is $5. d. When the wage is $5 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets? unit(s) of labor and unit(s) of capital. e. The reduction in wages from $10 to $5 caused the firm to utilize multiple choice more capital and more labor. more capital, but less labor. more labor, but less capital. less labor and less capital.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 3E

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Firm XYZ produces specialty widgets using labor and capital. The table below shows the productivity of both resources. The initial cost of a worker is $10 and the cost of capital is $20.

Workers	Total Product (Labor)	Marginal Product of Labor	Marginal Product of Labor per dollar W = $10	Capital	Total Product (Capital)	Marginal Product of Capital	Marginal Product of Capital per dollar P = $20
0	0	-	-	0	0	-	-
1	500	500		1	1,000	1,000	50
2	900	400		2	1,900	900	45
3	1,200	300		3	2,700	800	40
4	1,400	200		4	3,400	700	35
5	1,500	100		5	4,000	600	30

a. Complete the Marginal Product of Labor per dollar when the wage is $10.

b. When the wage is $10 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets?

unit(s) of labor and unit(s) of capital.

c. Suppose the wage rate falls to $5. Complete the Marginal Product of Labor per dollar when the wage is $5.

d. When the wage is $5 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets?

unit(s) of labor and unit(s) of capital.

e. The reduction in wages from $10 to $5 caused the firm to utilize

multiple choice

more capital and more labor.
more capital, but less labor.
more labor, but less capital.
less labor and less capital.

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