A Firm Is Making a Long-Run Planning Decision

question 39

Essay

A firm is making a long-run planning decision.It wants to decide on the optimal size of plant and labor force.It is considering building a medium-sized plant and hiring 100 workers.Engineering estimates suggest that at those levels,the marginal product of capital will be 100 and the marginal product of labor will be 75.If the wage rate is $5 and the rental rate on capital is $10,is the firm making the right decision? Support your answer.

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Definitions:

Sensory Intelligence

The ability to understand and manage sensory input, including recognizing how one processes sensations and effectively using this knowledge in daily life.

Sir Francis Galton

A British polymath known for his pioneering studies of human intelligence and for introducing the use of questionnaires and surveys for collecting data.

Spatial Abilities

The capacity to understand, reason, and remember the spatial relations among objects or space.

Stanford-Binet Scales

A standardized test that assesses intelligence and cognitive abilities in children and adults, ranging from age two to adulthood.