A Firm Is Currently Hiring Capital and Labor So That

question 170

Multiple Choice

A firm is currently hiring capital and labor so that MP_L/P_L < MP_K/P_K. If the firm wishes to maximize profits it should hire

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

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Definitions:

Indifference Curve

A graph that represents combinations of goods among which a consumer is indifferent, showing the same level of satisfaction to the consumer.

Utility

A measure of satisfaction, usefulness, or pleasure derived from consuming goods and services.

Budget Constraint

A limit on the consumption bundles that a consumer can afford given the prices of goods and the consumer's income.

Utility

The satisfaction or benefit derived from the consumption of goods and services.