Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A manager hires labor and rents capital in a very competitive market. Currently, the wage rate is $12 per hour and capital is rented at
A manager hires labor and rents capital in a very competitive market. Currently, the wage rate is $12 per hour and capital is rented at $8 per hour.
a. If the marginal product of labor is 60 units per hour and the marginal product of capital is 60 units per hour, is the firm using the cost-minimizing combination of labor and capital?
b. If not, should the firm increase or decrease the amount of capital used in its production process?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started