Suppose a factory produces 120 units of output per month and it is deciding how much labor and capital it should hire. If labor costs $230 per unit and capital costs $440 per unit, which combination of labor and capital should the firm use to produce the 120 units of output?
Labor capital mix
Almost every firm has to choose its labor capital mix when deciding how to organize its production. The key considerations are cost of labor and capital and their relative productivities.
Answer and Explanation: 1
Output is 120 units per month. Labor cost is 230 per unit of labor and capital cost is 440 per unit of capital.
We will assume L units of labor and C...
See full answer below.
Become a member and unlock all Study Answers
Start today. Try it nowCreate an account
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 3 / Lesson 8
The production possibility curve demonstrates the potential profit from a given economic condition. See how this illustrates different economic conditions through evaluating scarcity, production factors, efficiency, and opportunity costs.