PK $4.00 Po-$2.00 PL-$2.00 Assume: K MPK MP/PK MRP/PK MRP/PL L MPL MP/PL 1 28 7...

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PK $4.00 Po-$2.00 PL-$2.00 Assume: K MPK MP/PK MRP/PK MRP/PL L MPL MP/PL 1 28 7 14 15 1 5 10 246 2 12 2 12 8 4 3 20 5 10 3 3

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Answer 1

Answer #1

K	MPK	L	MPL	MRPK = MPK*PQ	MRPL= MPL*PQ
1	28	1	15	56	30
2	24	2	12	48	24
3	20	3	9	40	18
4	12	4	6	24	12
5	8	5	3	16	6
6	4	6	1	8	2
7	2	7	0.5	4	1
8	1	8	0.25	2	0.5
9	0.5	9	0.125	1	0.25


Equilibrium employment of capital is suc that MRPK = Pk.
This happens at MRPK = 4, K = 7.
For Labour, MRPL = PL = 2. This happens at L=6.

Q = KMPK+LMPL
Q = 72+61
Q = 14+6 = 20
TR = P_QQ = 220 =40
TC = P_LL+P_KK
TC= 26+47 =12+28 = 40

Profit = TR - TC
=40-40 = 0

Thus the correct option is ©.

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Answer 2

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