1) “A firm will never find it optimal to employ

1) “A firm will never find it optimal to employ so much of an input that its marginal product is negative.” Is this statement true or false? Explain your answer.

2) You hire a consulting firm, and its report suggests that you have plenty to worry about: The cost of capital is $200 per hour, the wage paid to your workers is $16 per hour, the marginal product of capital is 10 units per hour, and the marginal product of labor is 32 units per hour. What is the consulting firm going to recommend, and why?

As a production manager, your job depends on your ability to minimize the cost of production.


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