Answer to Question #148036 in Macroeconomics for Atif Saeed

Question

Hula hoop fabricators cost S100 each, Hula Hoop Company trying to decide how many of these machines to buy HHHHC expects to produce the following number of hoops each year for each level of capital stock shown
Number of fabricators
Number of Hoops Produced per Year 0. 0
1 100
2 150
3 180
4 195
5 205
6 210
I- Hula hoop have a real value of $I each, HHHHC has no other costs besides the cost of fabricators
a) Find the expected future marginal product of capital (in terms of dollars) for each level of capital The MPKf for the third fabricator, for example, is the real value of the extra output obtained when the third fabricator is added

Answer 1

To determine the marginal product of capital, MPK, for each level of capital, find the change in the number of hoops produced per year by subtracting the old value from the new value.