Consider a toy making firm’s long run production choices. The following table shows the marginal products...

Consider a toy making firm’s long run production choices. The following table shows the marginal
products of capital (K) and labour (L) for various methods of producing 10,000 toys per day.
Production
Method MPK MPL
A 100 4
B 90 18
C 80 30
D 70 40
E 60 48
F 50 55
G 40 60
Capital costs $5.25 per unit and labour costs $3.00 per unit.
a) Suppose the firm is currently producing 10,000 toys per day by using production method E. To
minimize the cost of production, should the firm adjust its employment of capital and/or labour? If so,
why should it hire more or less capital and/or labour?
b) Calculate, if possible, which method minimize costs

Expert Solution

Rahul Sunny answered 2 years ago

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