Suppose That the XYZ Company Hires Labor and Capital in Competitive

question 38

Essay

Suppose that the XYZ Company hires labor and capital in competitive input markets.Assume that labor costs W = $200 per day and that a unit of capital costs C = $150 per day.At the current level of production,labor's marginal product is MPL = 40 units of output produced per day and capital's marginal product is MPK = 30 units of output per day.Given the information provided,is the firm minimizing the cost of current production? Explain why or why not.If the wage were to increase to $W ^ { \prime }$ = $240 per day,discuss and explain the long run adjustments that the firm would make in response to the wage increase.

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