If the MPP of the Last Unit of Labor Hired

question 69

Multiple Choice

If the MPP of the last unit of labor hired equals 6 and the MPP of the last unit of capital hired equals 8, and the price of labor is $4 per unit and the price of capital is $4 per unit, then the firm

• A)is minimizing its costs with this combination of factors.
• B)is maximizing its profits with this combination of factors.
• C)should hire more labor and less capital in order to minimize its costs.
• D)should hire more capital and less labor in order to minimize its costs.
• E)a and b

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Definitions:

Put

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Conversion Value

The financial value of converting a convertible security, like a convertible bond, into its underlying equity at the current market price.

Convertible Bond

A convertible bond is a type of bond that can be converted into a predetermined number of shares of the issuing company's stock during certain periods during its life.

Black-Scholes

A mathematical model used to estimate the theoretical price of options and other derivatives, incorporating factors like volatility and time to maturity.