If the Marginal Physical Product (MPP) of the Last Dollar

question 103

Multiple Choice

If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should

• A) increase its use of labor and sell employ less capital.
• B) employ more capital.
• C) increase its use of both labor and capital.
• D) maintain its current factor utilization pattern.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health and operational efficiency.

After-Tax Discount

A reduction in the price of an item or service that is applied after calculating taxes.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life uniformly.

After-Tax Discount

The reduction or deduction from the gross amount on which tax has already been calculated and deducted.