Suppose a Firm Is Using 100 Units of Labour and 50

question 43

Multiple Choice

Suppose 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 $10 per unit and the price of capital is $5 per unit.The MPL equals 2 and the MPK equals 5.In this situation,

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

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Definitions:

Backward Integration

A business strategy where a company expands its role to fulfill tasks formerly completed by businesses up the supply chain, often including the acquisition of or merger with suppliers.

Keiretsus

A Japanese term for a group of affiliated companies that form a tight-knit alliance to work toward mutual business goals.

Response Strategy

A plan of actions designed to address specific challenges, changes, or opportunities in the business environment.

Inventory

The items or goods a company holds for the purpose of resale or production, including raw materials, work-in-progress, and finished goods.