Question

When the market wage = $ 60 and the marginal product of labor (MP_L ) = 6 and the price of capital ( c)) is $ 10, then at optimal level of labor and capital, the marginal product of capital (MP_K ) is

		10
		6
		1
		0.17

Suppose a firm is operating in both a perfectly competitive product market and perfectly labor market. The firm’s short run production is Q = L²; where Q is output and L is labor, expressed in millions. Marginal product of labor (MP_L) = 2L and wage is 10. The price of the product is $ 2. Based on information above, the marginal revenue (MR) is

		$0.2
		$10
		$5
		$2

Consider the following production function, Q = L² + 20K. Marginal product of labor (MP_L) = 2L and wage is $5. Marginal product of capital (MP_K) = 20 and price of capital is $10. Then the MRTS at (L = 10 and K = 5), is equal to

		4
		2
		1
		1/2

Answer 1

(1) At optimal point; (MPL / MPK) = (price of labor / price of capital)

=> (6 / MPK) = ($60 / $10)

=> (6 / MPK) = 6

=> MPK = (6/6)

=> MPK = 1

Answer: Option (C)

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(2) In perfect competition, price is equal to marginal revenue.

The price of product is $2. Hence, the marginal revenue will be $2.

Answer: Option (D)

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(3) MPL = 2L

=> MPL = 2(10)

=> MPL = 20

and. MPK = 20

MRTS = (MPL / MPK)

=> MRTS = (20/20)

=> MRTS = 1

Answer: Option (C)