Suppose a Firm Is Employing Labour (L)and Capital (K)such That

question 64

Multiple Choice

Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL.If the price of labour rises,the cost-minimizing firm should then

• A)employ more labour and less capital because MPK/MPL > PK/PL.
• B)employ more capital and less labour because MPK/MPL > PK/PL.
• C)employ more labour and less capital because MPK/MPL < PK/PL.
• D)employ more capital and less labour because MPK/MPL < PK/PL.
• E)do nothing.

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