Suppose That a Firm Is Using 100 Units of Labour

question 103

Multiple Choice

Suppose that a firm is using 100 units of labour and 50 units of capital to produce 200 fax machines per day. The price of labour is $10 per unit and the price of capital is $5 per unit. The MPL equals 2 and the MPK equals 5. In this situation,

• A) the firm should decrease the use of both inputs.
• B) the firm should increase the use of both inputs.
• C) the firm is minimizing its costs.
• D) the firm could lower its production costs by increasing labour input and decreasing capital input.
• E) the firm could lower its production costs by decreasing labour input and increasing capital input.

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Definitions:

Television Commercial

A short advertising message broadcast on television, designed to promote products, services, or ideas to consumers.

Prejudice

A preconceived opinion or judgment about someone or something that is not based on reason or actual experience.

Impression Formation

The psychological process by which individuals form opinions and judgments about other people based on available information and personal biases.

Cognitive Dissonance

A state of mental distress caused by possessing multiple contradictory beliefs, ideas, or values concurrently.