Assume a Firm Uses Two Inputs,capital and Labor

question 85

Multiple Choice

Assume a firm uses two inputs,capital and labor.All else constant,an increase in the price of labor would create an incentive for the firm to:

• A)substitute labor for capital in its production function.
• B)substitute capital for labor in its production function.
• C)hire more capital and labor.
• D)hire less capital while holding the amount of labor employed constant.

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Definitions:

Manufacturing Overhead

Indirect factory-related costs incurred when a product is manufactured, including costs like maintenance, electricity, and equipment depreciation.

Indirect Cost

A cost that cannot be easily and conveniently traced to a specified cost object.

Factory Supervisor

An individual responsible for overseeing the production processes and workers within a manufacturing facility.

Direct Cost

A cost that can be easily and conveniently traced to a specified cost object.