Suppose MP_L = 20 and MP_K = 40 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Question

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For production to be efficient, the ratio of marginal products to their respective input prices must be equal. Given MP_L = 20, MP_K = 40, and the rental rate on capital is $10, the wage rate must be $5 to satisfy the condition: MP_L/wage = MP_K/rental rate, i.e., 20/wage = 40/10. Solving gives wage = $5.

Suppose MPL = 20 and MPK = 40 and the Rental

Suppose MP_L = 20 and MP_K = 40 and the Rental