The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day. $$\begin{array} { | c | c | c | }
\hline \begin{array} { c }
\text { Production } \
\text { Method }
\end{array} & \text { MP } _ { K } & \text { MP}_{L} \
\hline \text { A } & 50 & 4 \
\hline \text { B } & 45 & 8 \
\hline \text { C } & 40 & 12 \
\hline \text { D } & 35 & 16 \
\hline \text { E } & 30 & 20 \
\hline \text { F } & 25 & 24 \
\hline \text { G } & 20 & 28 \
\hline
\end{array}$$ TABLE 8- 2
-Refer to Table 8- 2.If capital costs $6 per unit and labour costs $4 per unit,which production method minimizes the cost of producing 1000 toys per day?
A)method E
B)method C
C)method B
D)method F
E)method D

Question

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day. $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Production } \
\text { Method }
\end{array} & \text { MP } _ { K } & \text { MP}_{L}  \
\hline \text { A } & 50 & 4 \
\hline \text { B } & 45 & 8 \
\hline \text { C } & 40 & 12 \
\hline \text { D } & 35 & 16 \
\hline \text { E } & 30 & 20 \
\hline \text { F } & 25 & 24 \
\hline \text { G } & 20 & 28 \
\hline
\end{array}$$ TABLE 8- 2
-Refer to Table 8- 2.If capital costs $6 per unit and labour costs $4 per unit,which production method minimizes the cost of producing 1000 toys per day?
A)method E
B)method C
C)method B
D)method F
E)method D

Quizplus · Accepted Answer

Method E minimizes the cost of producing 1000 toys per day because it has the lowest total cost of production. The total cost of production is equal to the cost of capital plus the cost of labor. The cost of capital is equal to the marginal product of capital multiplied by the quantity of capital used. The cost of labor is equal to the marginal product of labor multiplied by the quantity of labor used. In this case, the marginal product of capital is 30 and the quantity of capital used is 33.33. The marginal product of labor is 20 and the quantity of labor used is 50. The total cost of production is therefore equal to (30 * 33.33) + (20 * 50) = 1000.

The Following Table Shows the Marginal Products of Capital (K)and