Question

State whether you think each of the following questions is true (T), false (F), or uncertain
(U) and briefly explain your answer.
(a) If bread is produced by using a constant returns to scale (CRS) production function,
then if the number of workers doubled, twice as much bread will be produced.
(b) A competitive, prot-maximizing rm hires capital until the marginal product of labor
(MPL) equals money wage (W).

Answer 1

a) False. Company will produce doubled quantity of bread if not only number of workers doubled, but also capital.
b) False. Profit maximization rule: MPL/w=MPK/r