Marvin’s Milk Farm produces milk and sells it in a perfectly competitive market at $4 per bottle. The following table shows Marvin's weekly total and marginal product schedules, using labor and capital. Assume that labor and capital may be used independently; that is, one is not needed for the other factor to be productive. Therefore, the total amount of milk that Marvin's produces is obtained by adding together the amount of milk produced by labor and the amount of milk produced by capital. The table also shows total revenue and marginal revenue products (MRPMRP) of labor and capital. Finally, assume that Marvin's Milk Farm is a factor price taker in the labor and capital markets. Labor costs $72 per week, and capital costs $42 per week. Labor Total Product Marginal Physical Product Total Revenue MRP of Labor (Number of workers) (Bottles) (Bottles) (Dollars) (Dollars) 0 0 1 24 24 96 96 2 42 18 168 72 3 54 12 216 48 4 62 8 248 32 Capital Total Product Marginal Physical Product Total Revenue MRP of Capital (Bottles) (Bottles) (Dollars) (Dollars) 0 0 1 20 20 80 80 2 36 16 144 64 3 50 14 200 56 4 56 6 224 24 If Marvin’s Milk Farm wants to produce 74 bottles of milk per week, the least-cost combination of labor and capital is__ of labor and_ of capital. The profit-maximizing combination of resources is _ of labor and_ of capital. The profit-maximizing combination contains(same amount of labor and capital as,fewer units, more units than) the least-cost combination to produce 74 bottles of milk.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Marvin’s Milk Farm produces milk and sells it in a perfectly competitive market at $4 per bottle. The following table shows Marvin's weekly total and marginal product schedules, using labor and capital. Assume that labor and capital may be used independently; that is, one is not needed for the other factor to be productive. Therefore, the total amount of milk that Marvin's produces is obtained by adding together the amount of milk produced by labor and the amount of milk produced by capital. The table also shows total revenue and marginal revenue products (MRPMRP) of labor and capital. Finally, assume that Marvin's Milk Farm is a factor price taker in the labor and capital markets. Labor costs $72 per week, and capital costs $42 per week.

Labor	Total Product	Marginal Physical Product	Total Revenue	MRP of Labor
(Number of workers)	(Bottles)	(Bottles)	(Dollars)	(Dollars)
0	0
1	24	24	96	96
2	42	18	168	72
3	54	12	216	48
4	62	8	248	32

Capital	Total Product	Marginal Physical Product	Total Revenue	MRP of Capital
(Bottles)	(Bottles)	(Dollars)	(Dollars)
0	0
1	20	20	80	80
2	36	16	144	64
3	50	14	200	56
4	56	6	224	24

If Marvin’s Milk Farm wants to produce 74 bottles of milk per week, the least-cost combination of labor and capital is____ of labor and___ of capital.

The profit-maximizing combination of resources is ___ of labor and___ of capital.

The profit-maximizing combination contains(same amount of labor and capital as,fewer units, more units than) the least-cost combination to produce 74 bottles of milk.

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