Suppose That the Production of Wheat Requires Two Inputs, Labor

question 174

Multiple Choice

Suppose that the production of wheat requires two inputs, labor and fertilizer. The price of labor is $4.50, and the price of fertilizer is $3.00. A farmer is currently employing the inputs such that the marginal product of labor is 11 and the marginal product of fertilizer is 8. If the farmer is a cost-minimizer, he should

• A)use more labor and less fertilizer.
• B)use more fertilizer and less labor.
• C)use more labor and more fertilizer.
• D)continue using the same amounts of each input.

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Definitions:

Consignee

The retailer in a consigned inventory arrangement.

Retailer

A business entity that sells goods or services directly to consumers through various distribution channels to earn a profit.

Current Replacement Cost

The amount of money it would cost to replace an asset at the present time, considering its current condition.

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy.