A Business Is Employing Inputs Such That the Marginal Product

question 19

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:

Wages

A fixed regular payment, typically calculated on an hourly, daily, or piecemeal basis, made by an employer to an employee, especially to a manual or unskilled worker.

Tax Liability

The total amount of tax owed by an individual, corporation, or other entity to a taxing authority, such as the IRS or state tax agency.

Taxable Income

The portion of an individual's or corporation's income that is subject to taxation by the government.

Head of Household

A tax filing status for individuals who are unmarried or considered unmarried, have paid more than half the cost of keeping up a home for the year, and have a qualifying person living with them.