Suppose a Firm Is Producing 2,475 Units of Output by Hiring

question 57

Multiple Choice

Suppose a firm is producing 2,475 units of output by hiring 50 workers (W = $20 per hour) and 25 units of capital (R = $10 per hour) . The marginal product of labor and marginal product of capital are 40 and 25, respectively. Is the firm minimizing the cost of producing 2,475 units of output?

• A) Yes, the ratio of the number of workers to the wage equals the ratio of the number of units of capital to the rental rate.
• B) No, the firm should use more labor and less capital.
• C) No, the firm should use more capital and less labor.
• D) No, the firm should use more of both labor and capital.