Suppose That a Firm Is Using 100 Units of Labour

question 99

Multiple Choice

Suppose that a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day.The price of labour is $5 per unit and the price of capital is $2 per unit.The MPL equals 5 and the MPK equals 2.In this situation,the firm

• A)could lower its production costs by increasing labour input and decreasing capital input.
• B)is minimizing its costs.
• C)could lower its production costs by decreasing labour input and increasing capital input.
• D)should increase the use of both inputs.
• E)should decrease the use of both inputs.

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Definitions:

Comparative Advantage

In economics, comparative advantage refers to the ability of a country or individual to produce a particular good or service at a lower opportunity cost than its competitors.

Taxi Parts

Components or spares used in the maintenance and repair of taxicabs.

Oranges

A citrus fruit that is a common source of vitamin C, available in several varieties and used in both food and beverages.

Normative Statement

A statement that expresses a value judgment or opinion, indicating what ought to be rather than what is empirically observable.