A Cost- Minimizing Firm Will Increase Its Use of Labour

question 22

Multiple Choice

A cost- minimizing firm will increase its use of labour and decrease its use of capital when the

• A) marginal product of capital, per dollar spent on capital, is greater than the marginal product of labour, per dollar spent on labour.
• B) average product of capital is higher than the average product of labour.
• C) total product of capital is higher than the total product of labour.
• D) marginal product of capital, per dollar spent on capital, is less than the marginal product of labour, per dollar spent on labour.
• E) marginal product of capital is higher than the marginal product of labour.

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Definitions:

Expected Value

The anticipated value for a given investment or decision in probability and statistics, calculated as the sum of all possible values each multiplied by the probability of occurrence.

Risk Trading

The act of exchanging financial instruments or commodities with a variable level of risk, often in the hope of gaining a higher return.

Adverse Selection

A situation in economics and insurance where parties with higher risk are more likely to engage in an agreement, leading to unbalanced and unfavorable outcomes for one of the parties.

Diversification

An investment strategy aimed at reducing risk by allocating investments among various financial instruments, industries, or other categories.