CAPE Economics Unit 1 · 2014 · Paper 2 · Question 5(b)(iii)
Blue Corp manufactures semiconductor chips in a perfectly competitive market using a least-cost combination of inputs. Marginal product of labour is 28 chips per worker hour at a wage rate of $14/hour; marginal product of machine is 60 chips per machine hour.
Assuming the popularity of Blue Corp's semiconductor chips falls, explain with the aid of a well-labelled diagram the effect of this decrease on the marginal revenue product curve for machine hours.
The mark scheme is shown once you've answered.
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