A Firm Is Using 500 Units of Labor and 100

question 51

Multiple Choice

A firm is using 500 units of labor and 100 units of capital to produce 100 units of output.The price of labor is $5 per unit and the price of capital is $20 per unit.At these input levels,another unit of labor adds 50 units of output,while another unit of capital adds 400 units of output.The firm could increase output by

• A)10 units by spending $1 more on capital and $1 less on labor.
• B)10 units by spending $1 more on labor and $1 less on capital.
• C)350 units by spending $1 more on capital and $1 less on labor.
• D)350 units by spending $1 more on labor and $1 less on capital.
• E)none of the above

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Definitions:

Delivery

The process of transporting goods from a source location to a predefined destination.

Option Contract

A legal agreement that grants a party the right, but not the obligation, to buy or sell an asset at a predetermined price and within a specified time frame.

Lease Agreement

A contract in which one party agrees to rent property owned by another party for a specified period of time, in exchange for payment.

Offer Agreement

A detailed proposal by one party to enter into a contract, subject to acceptance by another party.