Name/Pd:_________________________
AP Micro
Mr. Davey
Optimal Combination of Resources Problem Set
1. Suppose a firm producing sunflower seeds has allocated its budget between
labor and capital at the lowest possible total cost. The marginal product of
labor is 25 gallons of seeds and the marginal product of capital is 20 gallons
of seeds. If the price of one unit of labor is $100, what is the price of one unit
of capital?
2. Refer to the table below. Assume the wage rate is $10 per day and he price of
pencils is $1.
Quantity of
Labor
0
Quantity of
Output
0
1
2
40
90
3
4
120
140
5
6
150
160
7
166
a. What is the MPL of the 4th worker?
b. What is the MPL per dollar of the 5th worker?
c. How many workers would the firm hire if it hired every worker for whom the
marginal product per dollar is greater than or equal to 1 pencil per dollar?
d. If the marginal product per dollar spent on labor is 1 pencil per dollar, the
marginal product of the last unit of capital hired is 100 pencils per dollar, and
the rental rate is $50 per day, is the firm minimizing its cost? Explain.
Name/Pd:_________________________
AP Micro
Mr. Davey