If the marginal physical product of more labor is twice as high as the marginal physical...
If the marginal physical product of more labor is twice as high as the marginal physical product of more machinery, a rational firm should
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Homework Answers
Answer
option d
d.
reduce the labor used and increase the machinery used only if labor
costs more than twice as much as machinery.
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A firm hires inputs where the marginal product per dollar is equal.
As given the MPL is twice of MPK means the firm uses both at any quantity if the price of a machinery is half of the labor.
And it should reduce labor if the price of labor is twice as machinery as the per dollar marginal product of labor is less than the machinery.
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