Question

In the production of televisions, the marginal rate of technical substitution of hours of labor for hours of capital is 0.8, and the company chooses 5 units of labor and 8 units of capital. If the marginal product of capital is 10 televisions per hour, what is the marginal product of labor?

a. 0.08
b. 125
c. 8
d. 1.6

Answer 1

Option (c) 8

Step-by-step explanation:

Data provided in the question:

Marginal rate of technical substitution of hours of labor for hours of capital, RTS = 0.8

Number of units of labor chosen = 5

Number of units of capital chosen = 8

Marginal product of capital = 10 televisions per hour

Now,

RTS = [ Marginal product of labor ] ÷ [ Marginal product of capital ]

0.8 = Marginal product of labor ÷ 10

or

Marginal product of labor = 8

Hence,

Option (c) 8