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:

Dividend Payout Ratio

A financial metric that measures the proportion of earnings a company pays to its shareholders in the form of dividends, expressed as a percentage of its earnings.

Equity Capital

Capital acquired by a corporation in return for partial ownership of the corporation.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost liquidity.

Dividend Reinvestment Plan

A plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date.