Refer to the Following Graph

question 42

Multiple Choice

Refer to the following graph.The price of capital (r) is $20. Why wouldn't the firm choose to produce 5,000 units of output with the combination at B?

• A)At B,MRTS < 3/2.
• B)At B,MP_K / r > MP_L / w.
• C)At B,MP_L < MP_K.
• D)both a and b
• E)none of the above

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Definitions:

Current Ratio

A financial ratio that evaluates a firm's capacity to meet its short-term liabilities, which are due within a year.

Current Assets

Resources anticipated to be turned into cash, disposed of, or used up within a year or during the standard operational cycle of the company.

Current Liabilities

Short-term financial obligations that are due within one year or within a company's operating cycle.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and efficiency.