Assume a Firm Produces 500 Units of a Good by Using

question 15

Multiple Choice

Assume a firm produces 500 units of a good by using two inputs,capital and labor,whose per unit prices are $10 and $4.Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10.To minimize costs this firm should employ:

• A)the existing combination of resources.
• B)more labor and less capital.
• C)more capital and less labor.
• D)both more labor and more capital.

---

Definitions:

Isolated Town

A community located far from major population centers, often with limited access to goods, services, and outside communication.

Price Maker

A price maker refers to a firm or entity that has enough control over the market to influence the price of its product or service, as opposed to being a price taker who must accept market prices.

Pure Competition

An ideal market scenario where products are identical, information is freely available, and there is free entry and exit of firms, ensuring no individual control over prices.

Allocative Efficiency

The optimal distribution of resources to produce the types of goods and services most desired by society.