Suppose a Firm Is Using 100 Units of Labour and 50

question 10

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

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Definitions:

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