Question

Explain how a firm sets its optimum input (labor) level.  How is this optimum arrived at? Please...

Explain how a firm sets its optimum input (labor) level.  How is this optimum arrived at?

Please use Microeconomics concepts to explain it.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Optimum input level is determined by the following rule

Price of the product * marginal product of the input

= Price of the input

When there are two inputs used by the firm, the following rule is used

Marginal product of input 1/ price of input 1 = marginal product of input 2/ price of input 2

For many inputs it is ensured that this rule is followed which implies that the ratio of marginal product of a given input to its price should be same for all inputs.

in all of these cases marginal product of an input is the addition made to the total product when one more unit of that input is hired.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain the demand curve for labor as it coincides with the Marginal Revenue of Labor. Please...
Explain the demand curve for labor as it coincides with the Marginal Revenue of Labor. Please use Microeconomics concepts to explain it.
If labor is the only variable input of a firm and the marginal product of labor...
If labor is the only variable input of a firm and the marginal product of labor is falling, the firm will always product A. more than the profit-maximizing level of output B. less than the profit-maximizing level of output C. at a level of output where average total cost is at a minimum D. at a level of output where marginal costs are rising E. at a level of output where average variable costs are falling I know the right...
Explain please once answered. Adding a variable input (labor) to a fixed input (capital) will result...
Explain please once answered. Adding a variable input (labor) to a fixed input (capital) will result in an increase in output: Until the marginal product of labor is maximized. Until the average product of labor begins to fall. Until the marginal product of labor is becomes 0. As a firm adds labor beyond the point of diminishing returns: Total output continues to rise Total output is maximized Total output remains constant When q = 100, ATC is 10 and AVC...
Suppose a firm purchases capital and labor in competitive markets at prices of r=6 and w=8,...
Suppose a firm purchases capital and labor in competitive markets at prices of r=6 and w=8, respectively. With the firm's current input mix, the marginal product of capital is 7 and the marginal product of labor is 10. Is this firm minimizing its costs? If so, explain how you know. If not, explain what the firm ought to do. please write legibly and go step by step please and thank you
Explain step by step how to derive market demand function for labor with following concepts. Please...
Explain step by step how to derive market demand function for labor with following concepts. Please include all relevant questions and formula in your answer. Profit maximization, Total product of labor, Marginal product of labor, Value of marginal product of labor, First and second order condition of profit maximization
1. Explain the behavior of marginal physical product of labor, as labor input increases with capital...
1. Explain the behavior of marginal physical product of labor, as labor input increases with capital remaining constant. State the law that we get in this regard. 2.The total cost function of a firm is TC = 100 + 10 Q -2 Q 2 + 3 Q 3 where TC and Q denote total cost and output, respectively. Determine the level of fixed cost (if any), and equations for average total cost and average variable cost.
1. Assume that the only input of production for a hypothetical firm is labor. We are...
1. Assume that the only input of production for a hypothetical firm is labor. We are interested in the causal relationship between Quantity produced (??) and Price of labor (??), which, in this case is simply price of labor or simply wage. a- What factors affect the producer’s decision regarding how much to produce? Just name them. b- What factors we need to hold constant to be able to correctly hypothesize about the causal relationship between ?? and ??? Just...
a. A firm uses only two inputs: capital (K) and labor (L).Currently, the firm’s choice of...
a. A firm uses only two inputs: capital (K) and labor (L).Currently, the firm’s choice of capital (K) and labor (L) are such that marginal product of capital is 80 and the marginal product of labor is 10. If one put Labor on the x-axis, derive the slope of the firm’s isoquant given the information above (include the formula you use to do this). b. The price of capital (Pk) is $40 and the price of labor (PL) is $20....
A firm currently uses two inputs, 5 units of skilled labor (Ls) and 40 units of...
A firm currently uses two inputs, 5 units of skilled labor (Ls) and 40 units of unskilled labor (Lu), to produce its output. Input prices equal $100 per hour for skilled labor and $10 per hour for unskilled labor. The firm's current input combination is cost-minimizing. Put numbers in the blanks to derive the equation for the total cost: The firm's total cost (TC) = _________* Ls + _______* Lu b. And use this TC equation to draw an isocost...
“A firm will never find it optimal to employ so much of an input that its...
“A firm will never find it optimal to employ so much of an input that its marginal product is negative.” Is this statement true or false? Explain your answer.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT