Asked by neeranjali kallydeen on Jun 23, 2024

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Answer the question on the basis of the following data: QuantityMPofMRPofQuantity ofMPofMRPofofLaborLaborLaborCapitalCapitalCapital115$4518$242123626183927351546184412539539613626\begin{array}{cccccc}Quantity &MP of& MRP of &\text{Quantity of}& MP of &MRP of\\of Labor& Labor& Labor& Capital &Capital &Capital\\\hline1 & 15 & \$ 45 & 1 & 8 & \$ 24 \\2 & 12 & 36 & 2 & 6 & 18 \\3 & 9 & 27 & 3 & 5 & 15 \\4 & 6 & 18 & 4 & 4 & 12 \\5 & 3 & 9 & 5 & 3 & 9 \\6 & 1 & 3 & 6 & 2 & 6\end{array}QuantityofLabor123456MPofLabor15129631MRPofLabor$4536271893Quantity ofCapital123456MPofCapital865432MRPofCapital$2418151296 Refer to the given data.If the prices of labor and capital are $9 and $15 respectively,at the profit-maximizing level,the firm's total output will be:

A) 38 units.
B) 60 units.
C) 64 units.
D) 27 units.

Profit-maximizing Level

The output level at which a firm achieves the highest possible profit, determined where marginal cost equals marginal revenue.

Total Output

The complete quantity of goods or services produced in a specific time period by an economy or firm.

Labor Prices

The wages or compensation paid to employees for their labor or work performed.

  • Make use of marginal product and marginal resource cost figures to pinpoint resource assemblies that enhance profit maximization.
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Mariaesther BritoJun 26, 2024
Final Answer :
C
Explanation :
To find the profit-maximizing level of output, we need to find the point where the Marginal Revenue Product (MRP) of both labor and capital are equal to their respective prices.

For labor:
MP of labor / Price of labor = MRP of labor
15 / 9 = 1.67

Looking at the table, we see that the MRP of labor is equal to $27 when 3 units of labor are used. Therefore, the profit-maximizing level of labor is 3 units.

For capital:
MP of capital / Price of capital = MRP of capital
4 / 15 = 0.27

Looking at the table, we see that the MRP of capital is equal to $12 when 4 units of capital are used. Therefore, the profit-maximizing level of capital is 4 units.

Now, we can calculate the total output at the profit-maximizing level:

Total output = (MP of labor x units of labor) + (MP of capital x units of capital)
Total output = (9 x 3) + (4 x 15)
Total output = 27 + 60
Total output = 87

However, we need to check if this level of output is feasible given the constraint of labor input. At the profit-maximizing level, we are using 3 units of labor, which means we have 2 units of labor remaining. Looking at the table, we see that if we use 2 units of labor and 6 units of capital, we can produce an additional 3 units of output, for a total of 90 units.

Therefore, the best choice is C, with a total output of 64 units, since any level of output higher than 64 units is not feasible given the constraint of labor input.