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A Firm Is Currently Using Two Inputs: Labor and Capital

question 71

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A firm is currently using two inputs: labor and capital. It rents equipment for $1,000, which produces a value of the marginal product of $5,000. It hires workers at $10 an hour who produce a value of the marginal product of $100. The wages of workers rise by 20% and the rental price of capital increases by 25%. The firm should hire _________ labor and _________ capital.


Definitions:

Acid Rain

Precipitation that is significantly more acidic than normal due to atmospheric pollution, leading to harmful effects on the environment and structures.

Ecological Footprint

A metric that quantifies the amount of nature's resources an individual, community or activity consumes relative to the Earth's capacity to regenerate those resources.

Canada

A country in North America known for its vast landscapes, multicultural diversity, and as the second-largest country in the world by area.

Netherlands

A country located in Northwestern Europe, known for its flat landscape, canals, tulip fields, windmills, and cycling routes.

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