Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
expand_more
expand_more
format_list_bulleted
Question
Chapter 3, Problem 1QQ
To determine
The correct answer.
Expert Solution & Answer
Answer to Problem 1QQ
Option ‘a’ is the correct answer.
Explanation of Solution
Option (a):
The firm would employ labor and capital at the point where the marginal revenue product of labor and capital is equal to wage and rental price of capital. The marginal revenue product of labor can be calculated as follows:
Marginal revenue product of labor is $25.
Marginal revenue product of capital can be calculated as follows:
Marginal revenue product of capital is $200.
When increasing the quantity of labor and capital, it leads to reduce the marginal product of labor and capital, respectively, which in turn reduce the marginal revenue product of labor and capital. Thus, the firm would increase labor and capital till the point where the marginal revenue product of labor and capital is equal to wage and rental price of capital.
Thus, option (a) is correct.
Option (b):
When increasing the quantity of capital, it reduces the marginal product of capital and marginal revenue product of capital because of diminishing return. Thus, if the firm wants to maximize the profit, the manager should rent more capital. Thus, option (b) is incorrect.
Option (c):
When increasing the quantity of labor, it leads to reduce the marginal product of labor, which in turn reduces the marginal revenue product of labor and capital. Thus, if the firm wants to maximize the profit, the manager should hire more labor. Thus, option (c) is incorrect.
Option (d):
When increasing the quantity of labor and capital, it leads to reduce the marginal product of labor and capital, which in turn reduce the marginal revenue product of labor and capital. Thus, to maximize profit, the manager should increase both the quantity of labor and rent more capita. Thus, option (d) is incorrect.
Economics Concept Introduction
Marginal product of labor (MPL): It is the additional output a firm produces as a result of employing an extra unit of labor.
Marginal product of capital (MPK): It is the additional output a firm produces as a result of using an extra unit of capital.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
An increase of 20 million bicycles demand as a result of a lower p
??!!
. What the heck is this GDP thingy?
It is Thursday afternoon, just a few days before the holiday season starts in your region, and you decided to visit your uncle Chao who owns a local delivery company. While sitting in the living room watching the evening news with your uncle, you heard the news reporter stating the following with an optimistic tone: "According to recent studies, gross domestic product (GDP) is rising due to an increase in consumer spending. The increase in spending was due to an increase in consumer confidence because the job market has shown a positive increase in both employment and income."
Immediately, your uncle Chao looked at you with some confusion on his face and asked:
What the heck is GDP, and why does the news dude seem excited about its increase?
Does this “good” change in this GDP thingy have any effect on my delivery business? How?
Do I need to do something different to prepare for the rise in GDP? How?
Chapter 3 Solutions
Macroeconomics
Ch. 3 - Prob. 1QQCh. 3 - Prob. 2QQCh. 3 - Prob. 3QQCh. 3 - Prob. 4QQCh. 3 - Prob. 5QQCh. 3 - Prob. 6QQCh. 3 - Prob. 1QRCh. 3 - Prob. 2QRCh. 3 - Prob. 3QRCh. 3 - Prob. 4QR
Ch. 3 - Prob. 5QRCh. 3 - Prob. 6QRCh. 3 - Prob. 7QRCh. 3 - Prob. 8QRCh. 3 - Prob. 1PACh. 3 - Prob. 2PACh. 3 - Prob. 3PACh. 3 - Prob. 4PACh. 3 - Prob. 5PACh. 3 - Prob. 6PACh. 3 - Prob. 7PACh. 3 - Prob. 8PACh. 3 - Prob. 9PACh. 3 - Prob. 10PACh. 3 - Prob. 11PACh. 3 - Prob. 12PACh. 3 - Prob. 13PACh. 3 - Prob. 14PA
Knowledge Booster
Similar questions
- 3. I need people who don’t want me! As an operations manager at a factory that produces manual tools, you were tasked with preparing a new site for expansion. The plan is to start production in the new location within 6 months from the current date. The new location requires 100 workers to operate fully. The workers you need don’t require any form of education or special skills because the tasks at the factory are simple and straightforward. In other words, you typically hire lower-skilled workers. In recent years, your company has been having problems finding workers who meet those criteria because the demand for them is so high. While sitting in your office, your teammate, Alejandra, walked to your office and said, "Have you heard the recent news about the economy? They said that investment has declined, and government spending has declined too. They also said that GDP is expected to shrink in the next 6 to 10 months. I wonder what is next." Then, she looked at you and said: How…arrow_forwardX Apex Learning Courses public activity 003002 assessment K! Kahoot! 11.3.2 Quiz: Specialization Question 5 of 10 Which term describes a business's decision to focus on producing a small number of products? A. Opportunity cost B. Specialization C. Voluntary exchange D. Self-sufficiency PREVIOUS SUBMITarrow_forwardApex Learning Apex Learning Courses leaming.com/public/activity/1003002/assessment QQuizlet K! Kahoot! 1.3.2 Quiz: Specialization Question 5 of 10 Which term describes a business's decision to focus on producing a small number of products? OO A. Opportunity cost B. Specialization C. Voluntary exchange D. Self-sufficiency PREVIOUS SUBMITarrow_forward
- not use ai pleasearrow_forwardBefore the Civil War, the South traded with the North and with England. The South sold cotton and bought manufactured goods and food. During the war, one of President Lincoln's first actions was a blockade of the ports in the South to prevent this trade. The South had to increase its production of munitions and food. Draw a point to show the South's production point prior to the Civil War. Label it 1. Draw a point to show the South's consumption point prior to the Civil War. Label it 2. During the war, the South's factors of production were severely depleted and its production possibilities decreased. Draw a curve that shows the effects of the Civil War on the South's PPF. Label it PPF₁. Draw a point to show the South's production point during the Civil War. Label it 3. During the war, the South did not engage in trade. Draw a point to show the South's consumption point during the Civil War. Label it 4. 100 80- 60- Other goods and services (units) ☑ 40- 20- 200 400 600 PPF 800 1000…arrow_forwardSuppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second by $9, the third by $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $3.50. Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following table, fill in the marginal revenue, total cost, and total…arrow_forward
- Planes frequently push back from the gate on time, but then wait 2 feet away from the gate until it is time to queue up for takeoff. This increases fuel consumption and increases the time that passengers must sit in a cramped plane awaiting takeoff. The following table shows the pay schedule for the flight crew. Pay Per diem Holding pay per hour Flight Attendant Captain First Officer $3 $3 $3 $20 $20 $20 Hourly wage (after push back) $38 $184 $50 Per diem pay indicates how much the flight crew earns once it checks into the airport. Holding pay indicates how much the flight crew earns after it loads the plane. Hourly wage indicates how much the flight crew earns after it pushes back from the gate and turns on the beacon. In this scenario, who does not have an incentive to push back from the gate as early as possible? Check all that apply. Captain Flight attendants Passengers First officer True or False: Allowing the airline to decide when to push back from the gate would reduce…arrow_forwardThis Wendy’s commercial confuses the notions of appreciation and consumer surplus. Recall that consumer surplus is the difference between what a consumer is willing to pay for a good and what they actually pay for it. According to standard economic theory, consumer surplus must always bearrow_forwardIn economics, the cost of producing a good: Question 6 options: is the maximum value of other goods that could have been produced using the same resources. equals the out-of-pocket costs incurred in producing the good. is the value of inputs used up in production. is the value of other goods that could have been produced using the same resources.arrow_forward
- Please correct answer and don't used hand raiting and don't used Ai solutionarrow_forwardnot use ai pleasearrow_forwardGates Doubles Down on Malaria Eradication The End Malaria Council, convened by Bill Gates and Ray Chambers, seeks to mobilize resources to prevent and treat malaria. The current level of financing is too low to end malaria. Bruno Moonen, deputy director for malaria at the Gates Foundation, says that more resources, more leadership, and new technologies are needed to eradicate malaria in the current generation. Is Bruno Moonen talking about production efficiency or allocative efficiency or both? Bruno Moonen is talking about _______. A. production efficiency but not allocative efficiency B. production efficiency and allocative efficiency C. allocative efficiency but not production efficiency D. neither production efficiency nor allocative efficiencyarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning