Asksia AI LOGO

Sia

Question
Macroeconomics
Posted 3 months ago

Kraken Katchers, Inc. sells cryptid catching services in an oligopoly market. Its marginal product of capital per dollar spent on capital is 80 .

What is the marginal product of labor if the wage rate is $20\$ 20 and the firm minimizes costs?

Choose 1 answer:
(A) 0.25
(B) 4
(C) 1200
(D) 1600\mathbf{1 6 0 0}
(E) 1400
Sign in to unlock the answer
Answer from Sia
Posted 3 months ago
Solution
a
Cost Minimization Condition: In order to minimize costs, a firm will hire labor and capital until the marginal product per dollar spent is equal for both inputs. This is represented by the equation MPLW=MPKr\frac{MP_L}{W} = \frac{MP_K}{r}, where MPLMP_L is the marginal product of labor, WW is the wage rate, MPKMP_K is the marginal product of capital, and rr is the rental rate of capital
b
Given Data: We are given that MPK=80MP_K = 80 per dollar spent on capital and W=$20W = \$20. We assume that the rental rate of capital is $1 per dollar spent on capital since it's per dollar spent
c
Solving for MPLMP_L: Using the cost minimization condition, we can solve for MPLMP_L by rearranging the equation to MPL=MPK×WMP_L = MP_K \times W. Plugging in the given values, we get MPL=80×20MP_L = 80 \times 20
d
Calculation: Calculating the value of MPLMP_L gives us MPL=1600MP_L = 1600
Answer
1600
Key Concept
Cost Minimization in Input Choices
Explanation
The marginal product of labor is determined by ensuring that the marginal product per dollar spent is the same for all inputs when a firm minimizes costs.

Not the question you are looking for? Ask here!

Enter question by text

Enter question by image

Upgrade to Asksia Pro

Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.

Unlimited chat query usages
Strong algorithms that better know you
Early access to new release features
Study Other Question