If a Firm Uses Only Capital and Labor as Inputs

question 227

Multiple Choice

If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is higher than the marginal physical product of capital per last dollar spent?

• A) The firm should increase both the quantity of capital and the quantity of labor.
• B) The firm should decrease both the quantity of capital and the quantity of labor.
• C) The firm should increase the quantity of capital and reduce the quantity of labor.
• D) The firm should decrease the quantity of capital and increase the quantity of labor.

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Definitions:

Net Float

The difference between checks written against and deposited in an account, which has not yet been cleared and credited or debited.

Writes Cheques

The act of creating a written document instructing a bank to pay a specific amount of money from the writer's account.

Cheques Clear

Refers to the process by which a bank verifies that the funds available in the account of the individual who wrote the cheque are sufficient to cover the amount, and subsequently moves those funds to the account of the cheque recipient.

Incremental Bad Debt

Additional losses expected from non-payment or default by borrowers beyond what was originally anticipated.