Posted by Ed on .
The chapter is on Production and costs in thelong run, we are given a long run expansion path graph, all through out the book we are given labor cost and capital cost, ie. price of labor $5 dollars per unit(w), price of capital $10 per unit (r). Then I get the following question:
The production engineers at Impact Industries have derived an expansion path (graph shown but I can't re-produce) the price of labor per unit is $100 per unit. The question is what price does Impact Industries pay for capital?
I'm lost because we've always been given the per unit of capital....am I going about this wrong? How do I find the capital price?!?!?!?!?
Output Labor Capital (K) (w = $5) (r=???)
120 4 20
180 6 30
240 8 50
I don't believe you have provided enough information to solve. I suspect, perhaps, you are missing values for the marginal product of labor and the marginal product of capital?