possible answers a. w x MPL = 200, MPL/w = 2, MPL = 20, w/MPL = 0.5 b. MPK/r = 4

Question

possible answers

a. w x MPL = 200, MPL/w = 2, MPL = 20, w/MPL = 0.5

b. MPK/r = 4, MPK = 20, r x MPK = 100, r/MPK = 0.25

c. False, True, Uncertain

Smear pencil manufacturing Smear is a pencil manufacturing plant whose only inputs are capital (K) and labor (L.). In this industry, hourly wages (w) are $10 per worker and capital rent (r) is $5 per hour per machine. At its current choice of inputs, the marginal productivity of labor and the marginal productivity of capital are both equal to 20 (MPL = 20 pencils per worker, MPK = 20 pencils per machine). Spending an additional dollar on labor will result in an additional output of Spending an additional dollar on capital will result in an additional output of Select... Select... True or False: Smear is minimizing costs and choosing the most efficient combination of inputs. Select...

Explanation / Answer

a. MPL = 20

b. MPK = 20

c. False

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