Suppose That Capital Costs $6 Per Unit and Labour Costs

question 47

Multiple Choice

Suppose that capital costs $6 per unit and labour costs $3 per unit. If the marginal product of capital is 3 and the marginal product of labour is 6, the cost- minimizing firm should

• A) employ more capital and less labour.
• B) employ less capital and more labour.
• C) not change its current factor use.
• D) employ less of both capital and labour.
• E) employ more of both capital and labour.

Understand the impact of moral hazard in insurance markets.

Ascertain how different mechanisms (such as signaling and screening) can mitigate the problems of adverse selection.

Interpret utility functions and make decisions based on them.

Identify strategies for overcoming information asymmetry in markets.

---

Definitions:

Voluntary Turnover

The act of employees leaving an organization by their own choice rather than being dismissed.

Group Cohesiveness

The extent to which members of a group feel bonded or united toward achieving a common goal.

Social Activities

Engagements that involve interaction with others for entertainment, recreation, or other social purposes.

Cohesiveness

Refers to the degree of camaraderie within a group.