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 $\$ 20$ and the firm minimizes costs?

Choose 1 answer:
(A) 0.25
(B) 4
(C) 1200
(D) $\mathbf{1 6 0 0}$
(E) 1400

Question

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 $\$ 20$ and the firm minimizes costs?

Choose 1 answer:
(A) 0.25
(B) 4
(C) 1200
(D) $\mathbf{1 6 0 0}$
(E) 1400

Accepted Answer

∻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 $\frac{MP_L}{W} = \frac{MP_K}{r}$, where $MP_L$ is the marginal product of labor, $W$ is the wage rate, $MP_K$ is the marginal product of capital, and $r$ is the rental rate of capital. ‖ ‖ b ⋮ Given Data: We are given that $MP_K = 80$ per dollar spent on capital and $W = \$20$. We assume that the rental rate of capital is $1 per dollar spent on capital since it's per dollar spent. ‖ ‖ c ⋮ Solving for $MP_L$: Using the cost minimization condition, we can solve for $MP_L$ by rearranging the equation to $MP_L = MP_K imes W$. Plugging in the given values, we get $MP_L = 80 imes 20$. ‖ ‖ d ⋮ Calculation: Calculating the value of $MP_L$ gives us $MP_L = 1600$. ‖ ∻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. ⚹◊What is the formula to calculate the marginal product of labor in an oligopoly market when the firm minimizes costs⍭ Generate me a similar question◊

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