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Fishy Fish is a salmon canning plant whose only inputs are capital (K) and labor (L). In this industry, wages are $20 per hour per
Fishy Fish is a salmon canning plant whose only inputs are capital (K) and labor (L). In this industry, wages are $20 per hour per worker and capital rent is $45 per hour per canning machine. At its current choice of inputs, the marginal product of labor is 25 cans of salmon per additional worker hour and the marginal product of capital is 70 cans of salmon per machine hour. The plant has options to alter the amount of labor and capital it uses to produce the current output. In this plant, labor and capital are imperfect substitutes for one another; one can be substituted for the other, but the substitution will impact the marginal productivity of each input. Spending an additional dollar on labor will result in what level of additional output? Explain below
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