Question

1. Assume that labor and capital are the only two inputs a perfectly competitive firm uses to produce wheat. The firm hires its inputs in perfectly competitive resource markets. The unit price of labor is $8 and of capital is $20. When the firm employs the profit maximizing combination of these two inputs, the marginal product of labor is 2 tons of wheat and of capital is 5 tons of wheat. The price of wheat per ton must be

A. $2

B. $5

C. $8

D. $10

E. $4

Answer 1

The price of wheat per ton with respect to the cost and the marginal product is $4.

What is marginal product?

The marginal product is the per unit single cost expensed by the manufacturer over the cost. The marginal product for the firm for labour is 2 tons, while the capital is 5 tons of wheat.

The price per ton of wheat is given as:

$\rm Price \;respect\;to \;labour = \dfrac{unit\; per\; labour}{marginal \;product}\\Price \;respect \;to \;labour = \dfrac{8}{2}\\\\Price\; respect\; to \;labour=\ 4$

Thus, the price of wheat per ton must be $4. Hence, option E is correct.

Learn more about a marginal product, here:

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