Suppose that at a wage rate of $10, a firm which is using its resources efficiently has a marginal rate of technical substitution of 4, and at a $12.50 wage rate the marginal product of capital is 5. Then if there is an increase to a $12.50 wage rate and the firm makes the necessary adjustments to continue efficient resource utilization the marginal product of labor must be 25." Is this statement is true or false? First indicate the correct response and then explain your answer.

Suppose that at a wage rate of $10, a firm which is using its resources efficiently has a marginal rate of technical substitution of 4, and at a $12.50 wage rate the marginal product of capital is 5. Then if there is an increase to a $12.50 wage rate and the firm makes the necessary adjustments to continue efficient resource utilization the marginal product of labor must be 25." Is this statement is true or false? First indicate the correct response and then explain your answer.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.10P

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