Answer to Question #11882 in Macroeconomics for Jesotha
Your company is considering the acquisition of several other companies. You generally
target those companies that are inefficient because you can increase their value quickly
with better management. In the resource markets, the per unit price of labour is half the
per unit price of capital. The first company you are considering has a marginal product of
labour estimated at twice the marginal product of capital. The marginal products of both
inputs in the second company are equal. Which company would be the better takeover
target? Illustrate with a sketch graph of each firm why you picked the firm you did.