A Competitive, Capitalistic Firm Produces Gift-Wrapped Pieces of the Berlin

question 9

Multiple Choice

A competitive, capitalistic firm produces gift-wrapped pieces of the Berlin wall, using the standard Marxian inputs, K and L. The production function is , where y is the number of pieces produced.Neglect the use of the wall itself. The price of capital, K, is r, and the price of labor, L, is w

• A) Regardless of w and r, cost minimization requires that K = L.
• B) The technology has increasing returns to scale.
• C) If r > w, then L = 0.
• D) If r > w, then K = 0.
• E) None of the above.

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