According to the Wall Street Journal, Mitsubishi Motors recently announced a major restructuringplan in an attempt to reverse declining global sales. Suppose that as part of the restructuring planMitsubishi conducts an analysis of how labour and capital are used in its production process. Priorto restructuring Mitsubishi’s marginal rate of technical substitution is 0.15 ( in absolute value). Tohire workers. Suppose that Mitsubishi must pay the competitive hourly wage of US$ 15. In thestudy of production process and markets where capital is procured, suppose that Mitsubishidetermine that its marginal productivity of capital is 0.5 small cars per hour at its new targetedlevel of output and that capital is procured in a highly competitive market. The same studyindicates that the average selling price of Mitsubishi’s smallest car is US$ 9500. Determine therate at which Mitsubishi can rent capital and marginal productivity of labour at its new targetedlevel of output. To minimize costs Mitsubishi should hire capital and labour until the marginal rateof technical substitution reaches what proportion? The Long-run production function is given by; Y = 180 L0.8 K1.8 Where, Y = Output (mt/day), L = Labour (hours/mt) K = Capita (Rs/mt)a) Calculate Marginal Product of Labour (MPL) and Marginal Product of Capital (MPK), if L=12 and K=20
According to the Wall Street Journal, Mitsubishi Motors recently announced a major restructuringplan in an attempt to reverse declining global sales. Suppose that as part of the restructuring planMitsubishi conducts an analysis of how labour and capital are used in its production process. Priorto restructuring Mitsubishi’s
The Long-run production function is given by; Y = 180 L0.8 K
1.8 Where, Y = Output (mt/day), L = Labour (hours/mt) K = Capita (Rs/mt)
a) Calculate Marginal Product of Labour (MPL) and Marginal Product of Capital (MPK), if L=12 and K=20
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
