Consider a Firm That Uses Only Labour and Capital as Inputs

question 99

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

---

Definitions:

Reproductive Success

The passing of genes onto the next generation in a way that they too can pass on those genes.

Sun-exposed Slope

Describes the side of a hill or landform that receives direct sunlight, influencing its climate and vegetation.

Habitat

The natural environment or place where an organism, population, or species lives.

Metapopulation

A population that is divided into several local populations among which individuals occasionally disperse.