Question

You own a company that produces pens. The marginal product of the last unit of labor input is 25 and the marginal product of the last unit of capital input is 75. The market wage is $10, if your company is using the optimal combination of inputs, then the price of capital is Select one: a. $250 b. $30 c. $187.5 d. $750

Answer 1

Option(b) $30

Step-by-step explanation:

As per the data given in the question,

marginal product of labor per capital should be equal to marginal product of capital i.e.

Marginal product of labor ÷ Price of capital = Marginal product of capital ÷ wage

Price of capital = Marginal product of labor × Wage ÷ Marginal product of capital

= (75 × $10) ÷ 25

Price of capital = $30