If the Marginal Product of Labor Is 45 Units of Output

question 33

Essay

If the marginal product of labor is 45 units of output and the marginal product of capital is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28 per machine, are these two inputs being used in the least-cost combination and what should be done if they are not?

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Definitions:

Market System

A market system is an economic system where prices and the distribution of goods and services are determined by supply and demand in a competitive market.

Goods and Services

The physical items (goods) and actions or activities (services) that people produce and consume to satisfy their needs and wants.

Willing and Able

Refers to a consumer's readiness and capacity to purchase goods or services at a given price level.

Market System

An economic system in which economic decisions and the pricing of goods and services are guided by the interactions of citizens and businesses.