Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Joan Jillson owns a coffee shop. Assume that the marginal product of the labor, Joan employs (MPL) equals 500 cups per week and the marginal

Joan Jillson owns a coffee shop. Assume that the marginal product of the labor, Joan employs (MPL) equals 500 cups per week and the marginal product of her shop's capital (MPK) equals 1000. Assume also that the price of labor (PL). Joan pays her workers equal $250 per week and the price of capital (pk) for her coffee machines-equals $500 per week. Which of the following correctly analyzes whether Joan is minimizing her costs?

(Please provide explanation)

A) No, Joan is not minimizing her costs because MPL w is less than MPK r.

B) No, Joan is not minimizing her costs because MPK is greater than MPL and r is greater than w.

C) Yes, Joan is minimizing her costs because she is a price-taker in the markets for labor and capital.

D) Yes, Joan is minimizing her costs because MPK/r equals MPL/w.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

South Western Federal Taxation 2017 Comprehensive

Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young

40th Edition

1305874161, 978-1305874169

Students also viewed these Economics questions

Question

What background experience do you have?

Answered: 1 week ago