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Firm B is currently producing 1,000 units of output per day. It employs 12 workers, paying each $200 per day, using 6 machines at a
Firm B is currently producing 1,000 units of output per day. It employs 12 workers, paying each $200 per day, using 6 machines at a rental rate (r) of $300 per day. The marginal product of labor of the 12th worker is 40 units of output. a. The firm can acquire a new machine at the same r that will increase production by 50 units of output. Should the firm replace a worker with this machine? Show or briefly explain. b. If your answer is yes, how high would r have to be for the firm to not want the additional K? If your answer is no, how low would r have to be for the firm to want the additional K
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