The Following Table Shows the Marginal Products of Capital (K)and

question 75

Multiple Choice

The following table shows the marginal products of capital (K) and labour (L) for various methods for Firm ABC to produce 1000 toys per day. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Production } \\\text { Method }\end{array} & \text { MPK } _ { K } & \text { MP}_{L } \\\hline \text { A } & 50 & 4 \\\hline \text { B } & 45 & 8 \\\hline \text { C } & 40 & 12 \\\hline \text { D } & 35 & 16 \\\hline \text { E } & 30 & 20 \\\hline \text { F } & 25 & 24 \\\hline \text { G } & 20 & 28 \\\hline\end{array}$$ TABLE 8- 2
-Refer to Table 8- 2.Suppose capital costs $6 per unit and labour costs $4 per unit and the firm is employing production method A.How should this firm adjust its use of capital and labour to minimize costs?

• A)employ less capital and more labour
• B)employ more capital and less labour
• C)employ less capital and less labour
• D)employ more capital and more labour
• E)There is insufficient information to know.

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Definitions:

Mixed

A category that includes a combination of various elements or types.

Variable

An element, feature, or factor that is liable to vary or change.

Fixed

Refers to costs or expenses that do not change in proportion to the level of activity or production volume, such as rent or salaries.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to individual units of production, calculated before the production process begins.