A Firm Produces 15 Units of Output from the Last

question 141

Multiple Choice

A firm produces 15 units of output from the last dollar it spends on labor and 10 units from the last dollar spent on capital. The firm should

• A) employ more labor and less capital.
• B) employ more capital and less labor.
• C) employ more capital and labor.
• D) employ less capital and labor.

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Definitions:

Inelastic

Describing a situation where a change in the price of a good or service has a relatively small effect on the quantity demanded or supplied.

Price Elasticity

The responsiveness of the quantity demanded or supplied of a good to a change in its price, commonly referred to in economics as price elasticity of demand or supply.

Quantity Demanded

The total amount of a good or service that consumers are willing to buy at a given price over a specified period.

Midpoint Formula

A method used in economics to calculate the percentage change in quantity demanded or supplied, given two points, by dividing the change by the midpoint between the two points.