Question
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.
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