The long run. A chair manufacturer hires its assembly-line labour for $18 an hour and calculates that the rental cost of its machinery is $6 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination. The firm is currently using 1 hour of labour for every 3 hours of machine time. (Assume that labour is on the horizontal axis and capital is on the vertical axis). 1. Therefore, the firm [is, is not] currently minimizing its costs of production because: a) the ratio of MPL to the MPK is equal to the ratio of the wage to the rental cost. [true,false] b) the ratio of MPL to the MPK is greater than the ratio of the wage to the rental cost. ["", ""] c) MRTSLK is less than the ratio of the wage to the rental cost. ["", ""] d) the MPL divided by the wage is less than the MPK divided by the rental cost. ["", ""] e) MRTSLK equals the ratio of input prices. ["", ""]
The long run. A chair manufacturer hires its assembly-line labour for $18 an hour and calculates that the rental cost of its machinery is $6 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination. The firm is currently using 1 hour of labour for every 3 hours of machine time. (Assume that labour is on the horizontal axis and capital is on the vertical axis). 1. Therefore, the firm [is, is not] currently minimizing its costs of production because: a) the ratio of MPL to the MPK is equal to the ratio of the wage to the rental cost. [true,false] b) the ratio of MPL to the MPK is greater than the ratio of the wage to the rental cost. ["", ""] c) MRTSLK is less than the ratio of the wage to the rental cost. ["", ""] d) the MPL divided by the wage is less than the MPK divided by the rental cost. ["", ""] e) MRTSLK equals the ratio of input prices. ["", ""]
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The long run.
A chair manufacturer hires its assembly-line labour for $18 an hour and calculates that the rental cost of its machinery is $6 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination. The firm is currently using 1 hour of labour for every 3 hours of machine time. (Assume that labour is on the horizontal axis and capital is on the vertical axis).
1. Therefore, the firm [is, is not] currently minimizing its costs of production because:
- a) the ratio of MPL to the MPK is equal to the ratio of the wage to the rental cost. [true,false]
- b) the ratio of MPL to the MPK is greater than the ratio of the wage to the rental cost. ["", ""]
- c) MRTSLK is less than the ratio of the wage to the rental cost. ["", ""]
- d) the MPL divided by the wage is less than the MPK divided by the rental cost. ["", ""]
- e) MRTSLK equals the ratio of input prices. ["", ""]
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