Suppose that MP_L = 200 and MP_K = 240.If R = 30,then at which of the following wages would the firm want to hire fewer workers and more capital? A) W = 23 B) W = 24 C) W = 25 D) W = 26

Question

Quizplus · Accepted Answer

The firm will hire fewer workers and more capital when the ratio of the marginal product of labor to the wage (MP_L/W) is less than the ratio of the marginal product of capital to the rental rate (MP_K/R). For W = 26, MP_L/W = 200/26 < MP_K/R = 240/30.

Suppose That MPL = 200 and MPK = 240

Suppose That MP_L = 200 and MP_K = 240