With Its Current Levels of Input Use, a Firm's MRTS

question 166

Multiple Choice

With its current levels of input use, a firm's MRTS is 3 (when capital is on the vertical axis and labor is on the horizontal axis) . This implies:

• A) the firm could produce 3 more units of output if it increased its use of capital by one unit (holding labor constant).
• B) the firm could produce 3 more units of output if it increased its use of labor by one unit (holding capital constant).
• C) if the firm reduced its capital stock by one unit, it would have to hire 3 more workers to maintain its current level of output.
• D) if it used one more unit of both capital and labor, the firm could produce 3 more units of output.
• E) the marginal product of labor is 3 times the marginal product of capital.

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Definitions:

Direct Materials

The raw materials that can be directly traced to the manufacturing of a product.

Remachine

The process of reworking or refurbishing a piece of machinery to restore its functionality or improve its performance.

Manufacturing Cost

The total expense incurred in the process of producing goods, including direct materials, direct labor, and manufacturing overhead.

Scrap

Material that is discarded or left over from the manufacturing process, often repurposed or recycled, but sometimes considered waste.