Microeconomics,, 16th Canadian Edition

Problems

10. Industrial Footwear Inc. uses capital and labour to produce

workboots. Suppose this firm is using capital and labour such that

the is equal to 80 and the is equal to 20. For each set

of per-unit prices of capital and labour given below, determine

whether Industrial Footwear Inc. is minimizing its costs. If it is

not, determine the direction of factor substitution the firm should

make in order to do so.

a.

b.

c.

11. The following table shows the marginal product of capital and

labour for each of several methods of producing 1000 kilograms

of flour per day.

Production Method

A 14

B 12

C 10

MPK MPL

PK=$ 2 PL=$ 10

PK=$ 20 PL=$ 5

PK=$ 40 PL=$ 5

MPK MP