A Business Is Employing Inputs Such That the Marginal Product

question 116

Multiple Choice

A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90.The price of labor is $20, and the price of capital is $30.If the business wants to minimize costs while keeping output constant, 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:

Raw Materials Inventory

The total cost of all the materials not yet processed and used in the manufacturing of products, kept in inventory.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and can be directly associated with the finished product.

Raw Materials Purchased

The total cost of raw materials bought by a company for the purpose of production in a specific period.

Cost Of Goods Manufactured

The total expense incurred to produce products during a specific period, including costs of raw materials, labor, and manufacturing overhead.