Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firm is employing labor and capital such that the marginal physical product of labor and capital is 20 and 5 and the prices paid to labor and capital are Rs.60 and Rs.40 respectively. How would you characterize the firm?
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Factor markets and income distribution has come up 55 times in 6 exams since 2006.
This question is on Derived demand and marginal revenue product, part of Factor markets and income distribution in Microeconomics.
Why firms demand inputs: the value of what the last unit adds to output or revenue.
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Question from the UoH 2010 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.