Suppose a Firm Employs Two Inputs, X and Y, and That

question 65

Multiple Choice

Suppose a firm employs two inputs, X and Y, and that at their current levels of use MPX/PX >
MPY/PY. To minimize the cost of production, the firm should hire

• A) more input Y only if its price falls.
• B) more input Y and less input X.
• C) more input X only if its price decreases.
• D) more input X only if its price increases.
• E) more input X and less input Y.

---

Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, typically paid regularly (e.g., quarterly).

Convertible Preferred Stock

A type of preferred stock that gives the holder the option to convert the shares into a fixed number of common shares after a predetermined date.

Common Stock

A type of security that signifies part ownership in a corporation, referred to as corporate equity ownership.

Par Value

The face value of a bond or stock as stated by the issuer, not necessarily its market value.