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Capital-intensive or more labor-intensive

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1. Suppose that the price of labor is $10 per unit and the price of capital is $20 per unit. Assuming the firm is minimizing its cost, if the marginal product of labor is 50, what must the marginal product of capital be?

2. Suppose the price of capital increases to $25 per unit, while the price of labor stays the same. To minimize the cost of producing the same level of output, would the firm become more capital-intensive (i.e., more capital/less labor) or more labor-intensive?

Reference no: EM133341296

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