A Firm Is Using 50 Units of Labor and 100

question 79

Multiple Choice

A firm is using 50 units of labor and 100 units of capital to produce 2,000 units of output. The price of labor is $200 per unit and the price of capital is $100 per unit. At these input levels, another unit of labor adds 400 units to output and another unit of capital adds 600 units to output. The firm

• A) is minimizing the cost of producing 2,000 units of output.
• B) could produce 6 more units of output at the same cost by switching $1 from labor to capital.
• C) could produce 4 more units of output at the same cost by switching $1 from labor to capital.
• D) could keep output constant and reduce cost by using more capital and less labor.
• E) both c and d

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Definitions:

Interest

The fee for borrowing funds or the reward for lending them, often stated as a percentage of the initial sum.

Furniture

Movable objects intended to support various human activities such as seating, eating, and sleeping.

Focal Date

A specific date used as a reference point for financial calculations, such as the valuation of an asset or the determination of an interest period.

Loan Date

The date on which a loan agreement is signed and the funds are disbursed to the borrower.