5 föt the factors of production be labor and capital equipment. A competitive firm is facing the followinginput prices: the wage rate is wi = $8 per hour and the rental rate of capital is w2 = $16 per hour. Atthe current input mix the marginal product of labor is 24 and that of capital is 32. Should the firmchange its input mix? Why?

Cost is minimized where the right combination of labor and capital is used. following is the…

Answered: Let the factors of production be labor…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 1P

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Similar questions

Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
Would you consider an interest payment on a loan to a film an explicit or implicit cost?
Are there fixed costs in the lung-run? Explain briefly.
Are fixed costs also sunk costs? Explain.
A firm had sales revenue of 1 million last year. It spent 600,000 on labor, 150,000 on capital and 200,000 on materials. What was the firms accounting profit?
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?
If two painters can paint 200 square feet of wall in an hour, and three painters can paint 275 square feet, what is the marginal product of the third painter?
A common name for fixed cost is overhead. If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is 1,000. What does the average fixed cost curve look like? Use your response to explain what spreading the overhead means.

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Let the factors of production be labor and capital equipment. A competitive firm is facing the input prices: the wage rate is wi = $8 per hour and the rental rate of capital is w, = $16 per