Firm would increase quantity of labor

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Reference no: EM131095914

IF marginal product of capital is 4000, and marginal product of labor is 100, if wage rate is $10 and rental price of over is $500, costs do not appear to be minimaized. Cost is minimized when: (Marginal product of capital / Rental price) = (Marginal product of labor / Wage rate) (Marginal product of capital / Rental price) = 4000 / 500 = 8 (Marginal product of labor / Wage rate) = 100 / 10 = 10 Since (Marginal product of labor / Wage rate) > (Marginal product of capital / Rental price) they are getting more output for each dollar would the Firm would increase quantity of labor and/or more quantity of capital (ovens) to minimize cost, that is get same output for less cost?

Reference no: EM131095914

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