Capital and Labor Investment Decisions

The video explores factor markets, focusing on labor and capital as production factors. It explains how firms decide the optimal amount of labor and capital to employ by analyzing marginal revenue products and costs. The video also discusses how firms compare labor and capital investments to maximize output per dollar, ultimately seeking a balance where the marginal product per price is equal for both factors.

What are the two main factors of production discussed in the video?

• Labor and Land

• Labor and Capital

• Land and Technology

• Capital and Technology

In a perfectly competitive labor market, what determines the wage rate?

• The market wage rate

• The firm's internal policies

• The union agreements

• The government regulations

What is the marginal revenue product of labor?

• The total revenue generated by all workers

• The additional revenue generated by one more unit of labor

• The cost of hiring one more worker

• The average revenue per worker

How is the price of capital typically viewed in the context of factor markets?

• As the depreciation rate

• As the wage rate

• As the rent rate

• As the interest rate

What does a firm consider when deciding between labor and capital investment?

• The historical cost of each factor

• The output per dollar spent on each factor

• The total number of employees

• The market trends

If the marginal product of labor is 90 units and the wage rate is $10, what is the output per dollar for labor?

• 90 units per dollar

• 10 units per dollar

• 9 units per dollar

• 100 units per dollar

In the example, why is it more rational to invest in capital rather than labor?

• The firm has excess capital

• Capital provides more output per dollar

• Capital is cheaper than labor

• Labor is not available

What is the goal of a firm when choosing between labor and capital investments?

• To equalize the number of labor and capital units

• To minimize the number of employees

• To follow industry standards

• To maximize the output per dollar spent

In the scenario, what would make a firm indifferent between labor and capital?

• Equal total costs for both

• Equal marginal products for both

• Equal output per dollar for both

• Equal number of units for both

If the marginal product of capital is 20 and the price of capital is $10, what is the output per dollar for capital?

• 10 units per dollar

• 1 unit per dollar

• 2 units per dollar

• 20 units per dollar