If a Firm Pays Labor $5 and Receives an MP

question 81

True/False

If a firm pays labor $5 and receives an MP L of 10, while paying capital $100 and receiving an MP C of 100, to lower production costs it should hire more labor and less capital.

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Definitions:

Inelastic Demand

A market situation where the demand for a product does not significantly change with a change in its price.

Elastic Demand

A situation in which the demand for a product is sensitive to price changes, meaning that a small change in price results in a large change in the quantity demanded.

Fixed Cost

Costs that do not vary with the level of production or sales activities, such as rent or salaries.

Total Cost

Total cost refers to the complete sum of all expenses incurred in the production of goods or services, including fixed and variable costs.