A perfectly competitive producer of steel rods and steel beams employs 100 workers with identical skills. If steel rods and steel beams sell for the same price, which of the following rules should the producer always follow to use the 100 workers efficiently?

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Social Studies

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31 August, 02:09

A perfectly competitive producer of steel rods and steel beams employs 100 workers with identical skills. If steel rods and steel beams sell for the same price, which of the following rules should the producer always follow to use the 100 workers efficiently?

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Muhammad Key · Answer 1

First of all, the producer needs to calculate the marginal product of labor by dividing the change in total product by the change in labor. Then, considering the fact that all 100 workers have identical skills and both steel rods and steel beams are being sold for the same price, the producer should allocate workers so that the marginal product of labor is the same in both rod production and beam production.