Suppose Labor and Capital Are Variable Inputs

question 121

Multiple Choice

Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what happens to the amount of capital used by the firm?

• A) Decreases
• B) Increases
• C) No change
• D) We do not have enough information to answer this question.

---

Definitions:

Billboard Advertising

A form of outdoor advertising where large posters are displayed on billboards to promote products, services, or events.

Ethics Mindfulness

The practice of being fully aware of the ethical implications of one's actions and decisions in the professional environment.

Social Entrepreneurship

The practice of developing, funding, and implementing solutions to social, cultural, or environmental issues through a business model.

Moral Management

An approach where managers make decisions and lead in ways that are ethical and focused on the well-being of all stakeholders.