Labor to Maximize Profits
Sullivan's Custom Cabinets operate in a perfectly competitive market and employs labor and capital. Labor costs $30 a day. Machines cost $36 a day. Currently, Sullivan's has six machines and the marginal revenue product of capital is $30. Output sells at $5 per unit. Sullivan's hires you as a consultant and provides you with the following production function.
|
Workers (days)
|
Total Output
|
|
1
|
9
|
|
2
|
17
|
|
3
|
24
|
|
4
|
30
|
|
5
|
35
|
|
6
|
39
|
|
7
|
42
|
1. Explain, in your own words, the meaning of MRP.
2. How is MRP computed?
3. Using the data presented, in the short run, how many workers would you recommend Sullivan's hire per day to maximize profits?
4. Explain how you arrived at this number.
Question?
Choose a business which you are familiar and identify the types of tangible capital in use. What causes changes in physical capital stock? What types of intangible capital do you think are in use?
How can companies raise the funds necessary to purchase these capital items? Be sure to identify the company and what type of business they are in your response.