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:

Normal Duration

The typical amount of time expected under normal conditions to complete a task or process, often used in project planning and scheduling.

Network Technique

A method used in project management and operations research to plan and manage complex projects, often visualized through diagrams.

Precedence Relationships

The sequence or order in which tasks or activities must be performed in a project or process, often due to technical or logistical constraints.

Decreasing Activity Time

A strategy or process of reducing the time required to complete tasks or activities in a project to increase efficiency and possibly reduce overall project duration.