Assume a Firm Is Producing 1000 Units of a Good

question 92

True/False

Assume a firm is producing 1000 units of a good by using two inputs,capital and labor,whose per unit prices are $50 and $20.Assume also that the marginal physical product of the last unit of capital is 25 and the marginal physical product of the last unit of labor is 15.In order to minimize its costs of production,the firm should adjust its combination of inputs by employing more labor and less capital.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue is available to cover fixed costs and generate profit.

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as materials and labor.

Cost of Goods Sold

The total cost directly associated with producing the goods sold by a business during a specific period, including labor, materials, and manufacturing overhead.

Product Costs

The costs directly associated with producing goods, including direct materials, direct labor, and manufacturing overhead.