Answer to Question #98794 in Economics for Joseph Tawiah

Question #98794
A firm has an MPL=(K^0.5)/(L^0.5). Given K=100, L=121, Wages = 10, price of output=2
1. Is the firm operating efficiently
2. What is the optional rate of labor
1
Expert's answer
2019-11-18T10:18:54-0500

1. The firm is operating efficiently if

"MPL\/w = MPK\/r,"

where r is rate of capital, MPK is marginal product of capital.

In our case

"MPL\/w = \\frac{100^{0.5}}{121^{0.5}}\u00f710 = 0.09."

So, the firm is operating efficiently if MPK/r = 0.09.

2. To find out if the amount of labor is optimal we need to know MPK and r.


Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!

Leave a comment

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS