Labor Total Product Marginal Product Total Revenue MRP of Labor (Number of worke
ID: 2494945 • Letter: L
Question
Labor
Total Product
Marginal Product
Total Revenue
MRP of Labor
(Number of workers)
(Bottles)
(Bottles)
(Dollars)
(Dollars)
Capital
Total Product
Marginal Product
Total Revenue
MRP of Labor
(Bottles)
(Bottles)
(Dollars)
(Dollars)
If Marvin’s Milk Farm wants to produce 70 bottles of milk per week, the least-cost combination of labor and capital is (1 units, 2 units, 3 units, 3 units, 4 units) of labor and (1 units, 2 units, 3 units, 4 units) of capital.
The profit-maximizing combination of resources is (1, 2 3, or 4 units) of labor and (1, 2,3, or 4 units) of capital.
The profit-maximizing combination contains( fewer units of labor and capital than / the same amounts of labor and capital as/ more units of labor and capital than) the least-cost combination to produce 70 bottles of milk.
Labor
Total Product
Marginal Product
Total Revenue
MRP of Labor
(Number of workers)
(Bottles)
(Bottles)
(Dollars)
(Dollars)
0 0 1 18 18 54 54 2 34 16 102 48 3 46 12 138 36 4 56 10 168 30Explanation / Answer
1. the least-cost combination of labor and capital is 3 units of labor and 1 unit of capital. Since labor is less expensive than the capital. So firm have to use more labor and less capital.
When firm uses 3 units of labor and 1 unit of capital then output will be 70 bottles and cost of firm will be : 3X36 + 1X72 = 108 + 72 = 180
If firm uses 1 unit of labor and 3 units of capital then also firm is able to produce 70 bottles but in this case cost of firm will be: 1X36 + 3X72 = 36 + 216 = 252
So, least cost combination is 3 units of labor and 1 unit of capital.
2. Profit maximizing combination of resources occurs where Price of product = MRP of product
In the above scenario, Price of labor is $ 36 and MRP of labor is $ 36 at 3 units. Similarly, Price of capital is equal to the MRP of capital at $ 72 at 1 unit of capital.
So, profit maximising combination is: 3 units of labor and 1 unit of capital.
3. The profit-maximizing combination contains the same amounts of labor and capital as the least-cost combination to produce 70 bottles of milk.
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