Please finish carefully, I will give u a thumb up, Thanks! Suppose labour and ca
ID: 1173681 • Letter: P
Question
Please finish carefully, I will give u a thumb up, Thanks!
Suppose labour and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labour is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labour and the marginal product of labour declines to 20 units. Assuming the rental rate of capital remains the same, what is the marginal product of capital at the new optimal level of input usage? Select one a. 100 units b. 133 units c. 150 units d. We do not have enough information to answer this question. Suppose the labour market is perfectly competitive, but the output market is not. When the labour market is in equilibrium, the wage rate will Select one: a. be less than the marginal revenue product of labour b. equal the marginal revenue product of labour c. be greater than the marginal revenue product of labour O d. None of the above is necessarily correct. The marginal expenditure curve for labour is based on the assumption that Select one: a. the most productive workers are hired first. b. the wage rate is independent of the quantity of labour employed O c. the market supply curve for labour is infinitely elastic. d. all workers are paid the same wage rateExplanation / Answer
1) Solution: 133 units
Working: MR = w/MPL Thus after wage change MR = 15/20 = 0.75
Now, MR = r/ MPK, hence 0.75 = 100/MPK and it gives MPK to be 133 units
2) Solution: equal the marginal revenue product of labor
Explanation: When only labor market is perfectly competitive then the wage rate will be equal to marginal revenue product of labor when labor market is in equilibrium
3) Solution: all workers are paid the same wage rate
Explanation: The marginal expenditure curve for labour assumption is that the workers are paid same rate of wages