The MPP/Price Ratio for Labor Is 25/$5 and the MPP/Price

question 81

Multiple Choice

The MPP/Price ratio for labor is 25/$5 and the MPP/Price ratio for capital is 30/$6. A firm that employs both labor and capital will likely

• A)buy more labor and less capital because labor is cheaper.
• B)buy more capital and less labor because capital is more productive.
• C)maintain the current combination of capital and labor.
• D)buy more capital and less labor because capital is cheaper.
• E)There is not enough information to answer the question.

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Definitions:

Effective International Diversification

A strategy of investing across various countries and asset classes to reduce risk and potentially enhance returns.

Foreign Stocks

Shares of companies based outside the investor's home country, offering diversification benefits in a portfolio.

Currency Exposure

Refers to the risk of loss from fluctuations in exchange rates that can affect an investor's or company's investments, assets, and liabilities.

ADRs

American Depositary Receipts, a way for investors to own shares in a foreign company through U.S. securities exchanges.