A Firm Is Employing Inputs Such That the Marginal Product

question 75

Multiple Choice

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40.The price of labor is $5, and the price of capital is $8.If the firm wants to minimize costs, then it should

• A)use more labor and less capital.
• B)use less labor and less capital.
• C)use less labor and more capital.
• D)make no change in resource use.

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Definitions:

Employee

An individual who performs work under the direction and control of an employer in exchange for compensation.

Reasonable Skill

The level of competence that one can expect from a person with the standard abilities and knowledge in a particular field.

Breach of Contract

Occurs when one party fails to fulfill their obligations under a contract without a lawful excuse.

Agency Contract

A legal agreement where one party, the agent, agrees to act on behalf of another, the principal, in business dealings.