Assume a Firm Produces 500 Units of a Good by Using

question 37

Multiple Choice

Assume a firm produces 500 units of a good by using two inputs,capital and labor,whose per unit prices are $10 and $4.Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10.Is this firm minimizing its costs of producing 500 units of output?

• A)No, because the marginal products of the two inputs are not equal.
• B)No, because the MRTS and the price ratio for the two inputs are not equal.
• C)No, because the prices of the two inputs are not equal.
• D)The answer cannot be determined without more information.

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Definitions:

Net Realizable Value

The estimated selling price in the ordinary course of business minus the costs of completion, disposal, and transportation.

Repossessed

The act of taking back an asset, typically used when a borrower fails to make payments on a secured loan.

Deferred Gross Profit

Profit on installment sales that is not recognized immediately but deferred and recognized as payment is received.

Balance Sheet

An overview of a company's financial status, showcasing assets, financial obligations, and the stake of its shareholders at a precise moment.