Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one more worker, the firm's total monthly revenue will increase from $50,000 to $62,000. If he adds one more tractor, monthly revenue will increase from $50,000 to $68,000. Each additional worker costs $6,000 per month, while an additional tractor would also cost $6,000 per month. Instructions: Enter your answers as a whole number. a. What is the marginal revenue product of labor? The marginal revenue product of capital? b. What is the ratio of the marginal revenue product of labor to the price of labor (MRP ✓ ÷ PL)? What is the ratio of the marginal revenue product of capital to the price of capital (MRP C÷ PC)? c. Is the firm using the least-costly combination of inputs? (Click to select) = d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent? (Click to select)

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
Problem 3MC
Question
Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one more
worker, the firm's total monthly revenue will increase from $50,000 to $62,000. If he adds one more tractor, monthly revenue will
increase from $50,000 to $68,000. Each additional worker costs $6,000 per month, while an additional tractor would also cost $6,000
per month.
Instructions: Enter your answers as a whole number.
a. What is the marginal revenue product of labor?
The marginal revenue product of capital?
b. What is the ratio of the marginal revenue product of labor to the price of labor (MRP ✓ ÷ PL)?
What is the ratio of the marginal revenue product of capital to the price of capital (MRP C÷ PC)?
c. Is the firm using the least-costly combination of inputs?
(Click to select) =
d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?
(Click to select)
Transcribed Image Text:Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one more worker, the firm's total monthly revenue will increase from $50,000 to $62,000. If he adds one more tractor, monthly revenue will increase from $50,000 to $68,000. Each additional worker costs $6,000 per month, while an additional tractor would also cost $6,000 per month. Instructions: Enter your answers as a whole number. a. What is the marginal revenue product of labor? The marginal revenue product of capital? b. What is the ratio of the marginal revenue product of labor to the price of labor (MRP ✓ ÷ PL)? What is the ratio of the marginal revenue product of capital to the price of capital (MRP C÷ PC)? c. Is the firm using the least-costly combination of inputs? (Click to select) = d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent? (Click to select)
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