Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one moreworker, the firm's total monthly revenue will increase from $50,000 to $62,000. If he adds one more tractor, monthly revenue willincrease from $50,000 to $68,000. Each additional worker costs $6,000 per month, while an additional tractor would also cost $6,000per month.Instructions: Enter your answers as a whole number.a. What is the marginal revenue product of labor?The marginal revenue product of capital?b. What is the ratio of the marginal revenue product of labor to the price of labor (MRP ✓ ÷ PL)?What is the ratio of the marginal revenue product of capital to the price of capital (MRP C÷ PC)?c. Is the firm using the least-costly combination of inputs?(Click to select) =d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?(Click to select)

a. Marginal Revenue Product (MRP):Labor: Increase in revenue with additional worker = $62,000 -…

Answered: Consider a small landscaping company…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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Question

Consider a small landscaping company run by Mr. Viemeister. He is considering increasing his firm's capacity. If he adds one more
worker, the firm's total monthly revenue will increase from $50,000 to $62,000. If he adds one more tractor, monthly revenue will
increase from $50,000 to $68,000. Each additional worker costs $6,000 per month, while an additional tractor would also cost $6,000
per month.
Instructions: Enter your answers as a whole number.
a. What is the marginal revenue product of labor?
The marginal revenue product of capital?
b. What is the ratio of the marginal revenue product of labor to the price of labor (MRP ✓ ÷ PL)?
What is the ratio of the marginal revenue product of capital to the price of capital (MRP C÷ PC)?
c. Is the firm using the least-costly combination of inputs?
(Click to select) =
d. Does adding an additional worker or adding an additional tractor yield a larger increase in total revenue for each dollar spent?
(Click to select)

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