Refer to the Following

question 11

Multiple Choice

Refer to the following:

A producer is hiring 20 units of labor and 6 units of capital (bundle A) . The price of labor is $10, the price of capital is $2, and at A, the marginal products of labor and capital are both equal to 20.

-The producer

• A) is using the optimal combination of capital and labor.
• B) should use more labor and less capital.
• C) should use more capital and less labor.
• D) cannot determine without more information.

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