Heavenly Delights, an Ice Cream Maker, Has Discovered That the Ratio

question 172

Multiple Choice

Heavenly Delights, an ice cream maker, has discovered that the ratio of the marginal product of labor to the price of labor is 4.5, while the ratio of the marginal product of capital to the price of capital is 6.9.The firm has determined that it does not want to change its total costs.Heavenly Delights should:

• A) do nothing; the differences in the ratios of marginal product to input price are too small to matter.
• B) use more labor and less capital.
• C) use more capital and less labor.
• D) give up ice cream production and produce broccoli instead.

---

Definitions:

LLP

A legal structure for a business that provides the owners with limited liability protection, typically used by professional services firms.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.

Capital Account Balance

The net result of public and private international investments flowing in and out of a country, representing changes in national ownership of assets.

Partnership Capital

Represents the total equity or interest that partners have in a partnership, which can be changed through additional contributions or withdrawals.