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Table 1 below depicts a production technology illustrating the relationship between labor inputs and output. Our capital input is fixed, the price for the product
Table 1 below depicts a production technology illustrating the relationship between labor inputs and output. Our capital input is fixed, the price for the product is constant at $3 per unit, and each employee can be hired at a wage rate of $12 per hour. Fill in the table below and answer the next 3 questions. Suppose the Federal Reserve Bank of the United States lowers interest rates thus allowing the bank to loan funds at a lower interest rate to the firm. Suppose now that the firm can borrow from the bank at a rate of 2.5 percent. Based on this information, how many additional R&D projects would the firm choose to invest in? 4 2 3 6
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