Part 1 (0.3 point) See Hint Suppose Acme Widget Company (AWC) produces capital u
ID: 1166532 • Letter: P
Question
Part 1 (0.3 point)
See Hint
Suppose Acme Widget Company (AWC) produces capital using land, labor, and capital. The manager of AWC needs to determine whether the company is using the right mix of these three resources. The table below shows the current value of the marginal product (VMP) of each resource and the wage or rental price of each resource.
labor
.
options: LABOR, LAND, CAPITAL
Part 2 (0.3 point)
See Hint
increase
.OPTIONS: INCREASE, DECREASE
Part 3 (0.3 point)
See Hint
If the manager of AWC is using the best mix of capital, labor, and land, the value of the marginal product per dollar spent on each resource will be
OPTIONS: EQUAL, HIGEST FOR LAND, HIGHEST FOR CAPITAL.
Resource VMP Wage or rental price Capital $10,000 $500 Labor $600 $25 Land $24,000 $2,000Explanation / Answer
Value of marginal product is the multiplication of marginal physical product and the product price.It shows the value of the output produced.
Given Acme Widget Company (AWC) produces output capital with use of three factors of production land, labour and capital and the given table shows the inputs with their value of marginal productivity and the wage or rental price. So, company's value of marginal product is $10,000, $600 and $24,000 by use of capital with rental price $500, labour with price $25 and land with rental price $2000 respectively.
The manager of the company wishes to determine the right combination of the three inputs to produce output.