Consider an apple juice company whose marginal product of labor and marginal product of capital are...

 

Transcribed Image Text:

Consider an apple juice company whose marginal product of labor and marginal product of capital are respectively given by MPL (L, K) = and MPK (L,K) = L K for any input choice where L and K are the total labor and capital employed. The current input prices are w= 10 and r= 20, respectively. Suppose that the company currently hires (L, K) = (200,100) to produce 2000 units of output. Which of the following statements is true? The firm could lower its production cost by substituting a part of its current capital employment with labor. The marginal rate of technical substitution is (approximately) 1 at (L,K) = (200,100). The firm could lower its production cost by substituting a part of its current labor employment with capital. O The firm has minimized its production cost at (L, K) = (200, 100). Consider an apple juice company whose marginal product of labor and marginal product of capital are respectively given by MPL (L, K) = and MPK (L,K) = L K for any input choice where L and K are the total labor and capital employed. The current input prices are w= 10 and r= 20, respectively. Suppose that the company currently hires (L, K) = (200,100) to produce 2000 units of output. Which of the following statements is true? The firm could lower its production cost by substituting a part of its current capital employment with labor. The marginal rate of technical substitution is (approximately) 1 at (L,K) = (200,100). The firm could lower its production cost by substituting a part of its current labor employment with capital. O The firm has minimized its production cost at (L, K) = (200, 100).

Answer rating: 100% (QA)

Lets analyze the statements one by one 1 The firm could lower its production cost by substituting a ... View the full answer