smiling cow dairy can sell all the milk it wants for $4 agallon, and it can rent
ID: 1234084 • Letter: S
Question
smiling cow dairy can sell all the milk it wants for $4 agallon, and it can rent all the robots it wants to milk the cows ata capital rental price of $100 a day . it faces the followingproduction scedule : Number ofRobots Total Product 0 0 gallons 1 50 2 85 3 115 4 140 5 150 6 155how many robots should the firm rent ? explain smiling cow dairy can sell all the milk it wants for $4 agallon, and it can rent all the robots it wants to milk the cows ata capital rental price of $100 a day . it faces the followingproduction scedule : Number ofRobots Total Product 0 0 gallons 1 50 2 85 3 115 4 140 5 150 6 155
Explanation / Answer
From my previous post on calculating marginal product and marginalrevenue product: R y MPR P*MPR 0 0 N/A N/A 1 50 50 $200 2 85 35 $140 3 115 30 $120 4 140 25 $100 5 150 10 $40 6 155 5 $20 The firm should hire robots at the point whereP*MPR=wR, where wR is the factorprice for each robot. Since each wR=$100, thequantity of robots that yield a P*MPR of $100 is4. Thus, the firm should hire 4 robots.
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