When a Cost- Minimizing Firm Is Faced with an Increase

question 104

Multiple Choice

When a cost- minimizing firm is faced with an increase in the relative price of labour, it adjusts its factor usage so as to

• A) increase the marginal product of capital relative to the marginal product of labour.
• B) use more of both capital and labour per unit of output.
• C) increase the marginal product of labour relative to the marginal product of capital.
• D) use more labour per unit of output than before.
• E) maintain the previous usage of labour.

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Definitions:

Transfer

The act of moving or conveying something from one person, place, or situation to another.

Note

A note is a brief record of facts, topics, or thoughts, written down as an aid to memory.

Dishonored

A term often used in finance to describe the refusal of a bank to pay a check or draft presented against insufficient funds.

Payable

Refers to an amount of money that must be paid, typically in the context of bills or debts.