Suppose the marginal productivity of capital is 50 units of output and the marginal productivity of labor is 75 units of output. Capital costs $25 per hour and wages are $15 per hour. The firm: is minimizing its costs of production. has just the right amount of both inputs.. should hire more labor and use less capital. • should ●

Suppose the marginal productivity of capital is 50 units of output and the marginal productivity of labor is 75 units of output. Capital costs $25 per hour and wages are $15 per hour. The firm: is minimizing its costs of production. has just the right amount of both inputs.. should hire more labor and use less capital. • should ●

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Suppose the marginal productivity of capital is 50 units
of output and the marginal productivity of labor is 75
units of output. Capital costs $25 per hour and wages
are $15 per hour. The firm: is minimizing its costs of
production. has just the right amount of both inputs..
should hire more labor and use less capital. • should
hire less labor and use more capital. • is maximizing its
profit.

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