Answer to Question #66851 in Macroeconomics for jane

Question

State whether you think each of the following questions is true (T), false (F), or uncertain
(U) and briefly explain your answer.
(a) If bread is produced by using a constant returns to scale (CRS) production function,
then if the number of workers doubled, twice as much bread will be produced.
(b) A competitive, prot-maximizing rm hires capital until the marginal product of labor
(MPL) equals money wage (W).

Answer 1

a) False. Company will produce doubled quantity of bread if not only number of workers doubled, but also capital.
b) False. Profit maximization rule: MPL/w=MPK/r