Question

Hula hoop fabricators cost $500 each. The Hi-Ho Hula Hoop Company is trying to decide how many of these machines to buy. HHHHC expects to produce the following number of hoops each year for each level of capital stock shown. Number of Fabricators Number of Hoops Produced per Year MPKI NA 30 Ꭿ 55 Ꭿ 75 Ꭾ oo AW N-o 90 Ꭿ 100 Ꭿ . 105 Hula hoops have a real value of $6 each. HHHHC has no other costs besides the cost of fabricators. a. In the above table, find the expected future marginal product of capital (in terms of dollars) for each level of capital. The MPK for the third fabricator, for example, is the real value of the extra output obtained when the third fabricator is added.

Answer 1

Expected marginal product = change in output when an additional unit of capital is used

Fabricators	Hoops	MPK
0	0	N/A
1	30	30
2	55	25
3	75	20
4	90	15
5	100	10
6	105	5