A manufacturer of toys is employing fifty workers and using fifteen pieces of equipment to assemble toys.
Question:
A manufacturer of toys is employing fifty workers and using fifteen pieces of equipment to assemble toys. Currently, the marginal product of labor is $5 and the marginal product of capital is $25. Assuming the market prices for labor and capital are $12 and $20 respectively, answer the following:
a) Is this firm maximizing its profit?
b) What should this firm do with respect to its employees and its use of equipment?
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To determine whether the firm is maximizing its profit we need to assess the current allocation of l...View the full answer
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