Assume a Firm Produces 500 Units of a Good by Using

question 37

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.Is this firm minimizing its costs of producing 500 units of output?

• A)No, because the marginal products of the two inputs are not equal.
• B)No, because the MRTS and the price ratio for the two inputs are not equal.
• C)No, because the prices of the two inputs are not equal.
• D)The answer cannot be determined without more information.

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