Economics

The marginal product of labour in a production process is statistically estimated as MPL = 10(K/L) 0.5 currently the process is using 100 units of K and 121 units of L. Given the very specialized nature of capital equipment K, it takes about a year to increase K; but the Rate of labour input, L, can be varied daily. If the wage rate is $ 10 per unit and the price of output is $2 per unit; is the firm operating efficiently in the short run? If not, explain why. Also determine the optimal rate of labour input. On what factors does the labour efficiency depend?

The marginal product of labour in a production process is statistically estimated as MPL = 10(K/L) 0.5 currently the process is using 100 units of K and 121 units of L. Given the very specialized nature of capital equipment K, it takes about a year to increase K; but the Rate of labour input, L, can be varied daily. If the wage rate is $ 10 per unit and the price of output is $2 per unit; is the firm operating efficiently in the short run? If not, explain