Assume a Firm Produces 500 Units of a Good by Using

question 91

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.What will change to move the firm to a new cost-minimizing equilibrium?

• A)The marginal product of capital will fall and the marginal product of labor will increase.
• B)The marginal product of labor will fall and the marginal product of capital will increase.
• C)The price of labor will rise.
• D)The price of capital will rise.

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Definitions:

Continental Shelf

The extended perimeter of each continent, lying relatively shallow in the ocean, where the seabed is at a gentle slope before a steep drop off to the ocean floor.

Passive Margin

The transition between oceanic and continental lithosphere that is not an active plate boundary.

Oceanic Crust

The relatively thin part of the Earth's crust that underlies the ocean basins, composed mostly of basalt and gab-bro.

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