Part 2 05 point See HintSolution1 Profit is maximized when r

Part 2   (0.5 point)

See Hint

Solution

1) Profit is maximized when return from last dollar spent on each factor of production is same.

Thus for equilibrium MPof labor/Price of labor=MP of capital/price of capital=Mp of land/price of land.

Thus MP of labor/Wage=600/30=20

MP of capital/ rent of capital=40000/2000=20

And MP of land/price of land=225000/10000=22.5

Thus ans is B

2)Land because MP/price of land=22.5 which is highest