Firm XYZ produces specialty widgets using labor and capital. The table below shows the productivity of both resources. The initial cost of a worker is $10 and the cost of capital is $20. Workers Total Product (Labor) Marginal Product of Labor Marginal Product of Labor per dollar W = $10 Marginal Product of Labor per dollar W = $5 Capital Total Product (Capital) Marginal Product of Capital Marginal Product of Capital per dollar P = $20 0 0 - - 0 0 - - 1 500 500 1 1,000 1,000 50 2 900 400 2 1,900 900 45 3 1,200 300 3 2,700 800 40 4 1,400 200 4 3,400 700 35 5 1,500 100 5 4,000 600 30 a. Complete the Marginal Product of Labor per dollar when the wage is $10. b. When the wage is $10 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets? unit(s) of labor and unit(s) of capital. c. Suppose the wage rate falls to $5. Complete the Marginal Product of Labor per dollar when the wage is $5. d. When the wage is $5 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets? unit(s) of labor and unit(s) of capital. e. The reduction in wages from $10 to $5 caused the firm to utilize multiple choice more capital and more labor. more capital, but less labor. more labor, but less capital. less labor and less capital.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Firm XYZ produces specialty widgets using labor and capital. The table below shows the productivity of both resources. The initial cost of a worker is $10 and the cost of capital is $20.

Workers	Total Product (Labor)	Marginal Product of Labor	Marginal Product of Labor per dollar W = $10	Capital	Total Product (Capital)	Marginal Product of Capital	Marginal Product of Capital per dollar P = $20
0	0	-	-	0	0	-	-
1	500	500		1	1,000	1,000	50
2	900	400		2	1,900	900	45
3	1,200	300		3	2,700	800	40
4	1,400	200		4	3,400	700	35
5	1,500	100		5	4,000	600	30

a. Complete the Marginal Product of Labor per dollar when the wage is $10.

b. When the wage is $10 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets?

unit(s) of labor and unit(s) of capital.

c. Suppose the wage rate falls to $5. Complete the Marginal Product of Labor per dollar when the wage is $5.

d. When the wage is $5 and the cost of capital is $20, what is the least cost method for producing at least 2,200 specialty widgets?

unit(s) of labor and unit(s) of capital.

e. The reduction in wages from $10 to $5 caused the firm to utilize

multiple choice

more capital and more labor.
more capital, but less labor.
more labor, but less capital.
less labor and less capital.

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