Is the firm making the optimal input choice

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A firm is producing 1,000 units of output with 40 units of labor and 30 units of capital. The marginal product of the last units of labor and capital are, respectively, MPL = 60 and MPK = 120. The prices of labor and capital are, respectively, w = 30 and r = 40.

Is the firm making the optimal input choice? Why or why not? If not, what should the manager do? Show, the potential benefits that can be derived from the possible changes the manager introduces.

Reference no: EM13692295

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