Ask Question
BusinessBusiness
25 August, 01:32

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.

+1
Answers (2)
  1. 25 August, 04:40
    0
    133 units (B)

    Explanation:

    The marginal product of capital (MPK) is the additional output caused by the additional/increment in the input capital. and it is calculated as by substituting it from this formula

    = w / MPL = R / MPK therefore when you cross multiply equation 1 becomes

    = w (MPK) = R (MPL)

    = MPK = R (MPL) / w

    w = wage rate = $15 (new wage rate)

    R = rental rate of capital = $100 (the same rental rate)

    MPL = marginal product of labor = 20 (new marginal product of labor)

    MPK = marginal product of capital = $100 (20) / $15

    = $2000 / $15

    = 133 units
  2. 25 August, 05:17
    0
    The correct answer is b. 133 units.

    Explanation:

    At the optimal level of input usage:

    w / MPL = r / MPK where

    w = wage rate

    r = rental rate of capital

    MPL = Marginal product of labor

    MPK = Marginal product of capital

    After the wage rate decline, we have the following values:

    w = $15

    r = $100

    MPL = 20 units

    MPK = ?

    Substituting these values in the optimal condition:

    $15 / 20 = $100 / MPK

    MPK = $100 x 20 / $15

    = 133.33

    Therefore, the marginal product of capital (MPK) at the new optimal level of input usage is 133 units which corresponds to option b.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “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 ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Bill plans to open a self-serve grooming center in a storefront. The grooming equipment will cost $425,000, to be paid immediately.
Answers (1)
On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $88,000. A total of $4,000 was paid for installation and testing.
Answers (1)
Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.
Answers (1)
Julie and anna opened their store - "hot coffee, cool clothes" - just 12 months ago. the concept was based on a store that they saw when they visited new york on holidays in 2010.
Answers (1)
Which of the following statements represent a weakness or limitation of ratio analysis? Check all that apply. Ratio analysis is conducted using benchmarking techniques.
Answers (1)
New Questions in Business
Wages of $8,000 are earned by workers but not paid as of december 31, 2017. depreciation on the company's equipment for 2017 is $18,000. the office supplies account had a $240 debit balance on december 31, 2016.
Answers (1)
You have placed an antique sofa up for auction and the auctioneer has not made any special announcements about the sale. You can withdraw the sofa at any time before the auctioneer closes the sale by announcement or by the fall of the hammer.
Answers (1)
2. Provide a definition for the following terms: • Accounts receivable: Enter definition here. • Supplies: Enter definition here. • Prepaid rent: Enter definition here. • Furniture: Enter definition here.
Answers (1)
What is the term applied to the amount that net sales exceeds cost of goods sold on an income statement?
Answers (1)
Whenever marginal cost is greater than average total cost, A. average total cost is rising. B. marginal cost is falling. C. average total cost is falling. D. Both b and c are correct.
Answers (1)
Home » Business » 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.
Sign Up Forgot Password?