Question

Consider a perfectly competitive firm that produces computers. Each additional worker at this firm can produce four computers. Calculate the marginal factor cost if the computers are sold for $1,000 each, and the firm is maximizing profit. (Assume that marginal revenue product is the product of marginal product of the input and the marginal revenue of the firm.)

Answer 1

$4,000

Step-by-step explanation:

Each additional labor can produce 4 computers and each computer is sold for $1,000. This mean that the value of the marginal product of labor is $4,000 (1,000*4). At equilibrium, the value of marginal product of labor equals the wage rate. Therefore, the marginal factor cost is $4,000.