Suppose that at a wage rate of $10, a firm which is using its resources efficiently has a marginal rate of technical substitution of 4, and at a $12.50 wage rate the marginal product of capital is 5. Then if there is an increase to a $12.50 wage rate and the firm makes the necessary adjustments to continue efficient resource utilization the marginal product of labor must be 25." Is this statement is true or false? First indicate the correct response and then explain your answer.

Suppose that at a wage rate of $10, a firm which is using its resources efficiently has a marginal rate of technical substitution of 4, and at a $12.50 wage rate the marginal product of capital is 5. Then if there is an increase to a $12.50 wage rate and the firm makes the necessary adjustments to continue efficient resource utilization the marginal product of labor must be 25." Is this statement is true or false? First indicate the correct response and then explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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