The MPP/Price Ratio for Labor Is 25/$5 and the MPP/Price

question 81

Multiple Choice

The MPP/Price ratio for labor is 25/$5 and the MPP/Price ratio for capital is 30/$6. A firm that employs both labor and capital will likely

• A)buy more labor and less capital because labor is cheaper.
• B)buy more capital and less labor because capital is more productive.
• C)maintain the current combination of capital and labor.
• D)buy more capital and less labor because capital is cheaper.
• E)There is not enough information to answer the question.

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