Consider a Firm That Uses Only Labour and Capital

question 86

Multiple Choice

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

• A) not alter its present factor mix.
• B) decrease capital and increase labour.
• C) increase both labour and capital.
• D) decrease both capital and labour.
• E) substitute capital for labour until their marginal products are equal.

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Definitions:

Mean

The average value of a set of numbers, calculated by adding all the numbers together and dividing by the count of the numbers.

Categorical Data

Data that can be divided into specific groups or categories based on qualitative characteristics.

Variances

A measure of the dispersion indicating how far individual numbers in a dataset are from the mean.

Bimodal Distribution

A probability distribution with two different modes or peaks, representing two prevalent outcomes or characteristics in a dataset.