Consider a Firm That Uses Only Labour and Capital as Inputs.At

question 9

Multiple Choice

Consider a firm that uses only labour and capital as inputs.At the present use of labour and capital,the MP of labour is four times the MP of capital,and the price of labour is twice the price of capital.In order to minimize its costs,the firm should

• A)substitute capital for labour until their marginal products are equal.
• B)decrease both capital and labour.
• C)decrease capital and increase labour.
• D)increase both labour and capital.
• E)stay at its present factor mix.

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Definitions:

Investment

Allocation of capital or resources to assets with the expectation of generating profit or income.

Required Rate

The minimum acceptable return on an investment deemed necessary by an investor or business.

Investment Project

An undertaking that involves allocating resources like capital and labor to generate financial returns or achieve strategic goals.

Payback Method

A capital budgeting technique that estimates the time required to recoup the initial investment in a project.