Answer to Question #223026 in Microeconomics for Raksha

Question

If a cost-minimizing firm sells its services in an oligopolistic market, with a marginal product of capital of 10, a rental rate of capital of $5, and a wage rate of $20, what is the marginal product of labor?


4
20
40
60
80

Answer 1

Solution:

The marginal product of labor = 40

We know that, $\frac{MP_{L} }{MP_{K}}$

Where: w = wage rate

             r = Rental rate of capital

            MP_L = Marginal Product of Labor

            MP_K = Marginal Product of Capital

$\frac{MP_{L} }{20} =\frac{10 }{5}$

$\frac{MP_{L} }{20} =2$

MP_L = 40