Answer to Question #11882 in Macroeconomics for Jesotha

Question #11882
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.
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