Marginal product of labour and capital

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Reference no: EM1315972

A firm is using 20 units of labour and 30 units of capital to produce 4,000 units of output. At this combination the marginal product of labour is 50 and the marginal product of capital is 40. The price of labour is $30 and the price of capital is $20.

a. The MP per dollar of labour is _________ and the MP per dollar of capital is _________.

b. The firm can increase capital by one unit and decrease labour by _________ units while keeping cost constant. This will ____________ output by _________.

c. To maximize output at the given cost the firm will increase ____________ and decrease ____________ until the MRTS equals _________.

Reference no: EM1315972

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