A Cost- Minimizing Firm Will Increase Its Use of Labour

question 35

Multiple Choice

A cost- minimizing firm will increase its use of labour and decrease its use of capital when the

• A)marginal product of capital,per dollar spent on capital,is less than the marginal product of labour,per dollar spent on labour.
• B)average product of capital is higher than the average product of labour.
• C)marginal product of capital is higher than the marginal product of labour.
• D)marginal product of capital,per dollar spent on capital,is greater than the marginal product of labour,per dollar spent on labour.
• E)total product of capital is higher than the total product of labour.

---

Definitions:

Price

The financial requirement, expectation, or contribution made for the procurement of an item.

Demand

How much of a service or good that individuals are ready and financially capable of buying at several price points over a certain period.

Loanable Funds

The money available for borrowing, which is determined by the savings rate, income levels, and policies affecting interest rates.

Interest Rates

The cost of borrowing money, expressed as a percentage, which lenders charge borrowers for using their money for a period of time.