Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
8th Edition
ISBN: 9781337292603
Author: Mankiw
Publisher: Cengage Learning (2018)
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Chapter 18, Problem 1QR
To determine
To determine: How the production function is related to marginal productivity of labor.
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Suppose a firm finds that the marginal product of capital is 60 and the marginal product of labor is 20. If the price of capital is $6 and the price of labor is $2.50, describe how the firm should adjust its mix of capital and labor? What will be the result?
Explain how a firm’s production function is related toits marginal product of labor, how a firm’s marginalproduct of labor is related to the value of its marginalproduct, and how a firm’s value of marginal productis related to its demand for labor
A firm's production function is:
q = 20L1/2K1/2
where q is the firm's total product, L is the quantity of labor employed, and K is the quantity of capital employed. The price of labor is $25 per unit and the price of capital is $100 per unit.
a. What is the equation for the marginal product of labor?
b. What is the equation for the marginal product of capital?
c. Given the price of labor is $25 per unit and the price of capital is $100 per unit, what is the cost-minimizing combination of capital and labor that can produce 800 units of output?
Chapter 18 Solutions
Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
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- Assuming the firm is minimizing its cost and the price of labour is $10 per unit and the price of capital is $20 per unit. the marginal product of labour is 50, what must the marginal product of capital be?arrow_forwardFollowing is information on the production levels of three different firms. Firm A is currentlyproducing at a quantity where it is experiencing increasing returns. Firm B is currentlyproducing at a quantity where it is experiencing diminishing returns. Firm C is currentlyproducing at a quantity where it is experiencing negative returns.a. If each of the firms cut back on its labor force, what will happen to its marginalproduct of labor? And why?b. If each of the firms adds to its labor force, what will happen to its marginal product oflabor? And why?arrow_forwardSuppose that Tim runs his own lawn care service and that his firm is competitive in the lawn care industry. He has a fixed number of tools that can be used to maintain a yard, but he needs to determine the productivity gained from hiring various numbers of workers per week. Which of the following statements best represents the idea behind the marginal product of labor ( MPL )? When Tim hires more workers, he can mow more lawns per week, but at a decreasing rate. If Tim hires twice as many workers per week, he can mow twice as many lawns per week. If Tim buys one more lawn mower, he can mow 13 more lawns per week. If Tim hires an additional worker per week, he can mow 11 more lawns per week. The following graph portrays the weekly total product curve for lawn mowing given a fixed amount of capital and varying labor inputs. (Note: Each black point (plus symbol) represents a point on the total product curve.) 100 90 во 70 60 50 40 30 20 10 xxxx_ Total Product ° 0 1 2 4 5 7 8 10 LABOR…arrow_forward
- What is the marginal product of labor? the average output of a unit of labor the total output obtained by using one more unit of labor the average output obtained by using one more unit of labor the extra output obtained by using one more unit of laborarrow_forwardGiven that the level of labour is 10, the total production is 1,200, and the marginal product of labour is 200, what is the average product of labour?arrow_forwardBarb's Bakery employs three workers who produce 6 cakes per hour. After Barb hires a fourth worker, production increases to 12 cake per hour. Which of the following statements is TRUE? a. b. C. d. Because the marginal product of the fourth worker is greater than the average product of three workers, the average product must rise. Because the marginal product of the fourth worker is less than the average product of three workers, the average product must fall Because the marginal product of the fourth worker is less than the average product of three workers, the average product must rise. Because the marginal product of the fourth worker is greater than the average product of three workers, the average product must fall.arrow_forward
- If the marginal product of labor is 2 units of output per day per worker for the first five workers and 0 units of output for the sixth worker onward, draw the total product curve, the average product of labor curve, and the marginal product of labor curvearrow_forwardSuppose you are considering hiring another worker. Also assume that you are at a firm that is operating at a point where the marginal product of labor is 5 and the price of each unit of labor is $2, and the marginal product of capital is 20 and the price of each unit of capital is $10. Should you hire another worker? If you hire another worker, what will happen to the marginal product of labor and why?arrow_forward“After the fifth worker is hired at the hourly wage $40, the output rate increases from 64 pairs of shoes per hour to 72 pairs per hour.” Given the statement, which of the following is correct after the fifth worker is hired? Group of answer choices The marginal cost (MC) becomes $8. The marginal physical product (MPP) per labor hour becomes 5. The marginal cost (MC) becomes $5. The marginal physical product (MPP) per labor hour becomes $40.arrow_forward
- The owner of a Colorado bakery is maximizing profit. K The price of a loaf of bread is $4.00, a bakery worker's wage rate is $8 an hour, and the bakery employs ten workers. What is the marginal product of the tenth bakery worker? If, when the price of a loaf of bread rises to $5.00, the bakery hires twelve workers, what is the marginal product of the twelfth worker? >>> Answer to 2 decimal places. When the price of a loaf of bread is $4.00, the marginal product of the tenth bakery worker isarrow_forwardCon Co. produces a collectible card game. Currently, the price of capital is at $50 and the price of labor is at $10. The marginal product of capital is 200 and the marginal product of labor is 30. To minimize cost of the given output, Con Co. should Use more capital Use more capital and labor Leave capital and labor as is Use more laborarrow_forwardConsider an economy with 20 workers. If the marginal product of labor (MPL) is 13 and the market price (P) is $6, what isthe value of the marginal product of labor (VMPL)? Provide your answer below:arrow_forward
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