A Firm Is Using 500 Units of Labor and 100

question 77

Multiple Choice

A firm is using 500 units of labor and 100 units of capital to produce 100 units of output.Labor costs $5 per unit and capital $20 per unit.At these input levels,another unit of labor adds 5 units of output,while another unit of capital adds 40 units of output.If the firm uses 496 units of labor and 101 units of capital instead,what will happen?

• A)Cost will be unchanged,and output will increase by 20 units.
• B)Cost will be unchanged,and output will increase by 35 units.
• C)Output will be unchanged,and cost will decrease by $20.
• D)Output will be unchanged,and cost will decrease by $40.

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