Suppose a Firm Uses Labour and Capital to Produce Output

question 218

Multiple Choice

Suppose a firm uses labour and capital to produce output.The last unit of labour hired has a marginal product of 12 units of output, and the last unit of capital employed has a marginal product of 20 units.Use the optimal combination of inputs rule to calculate the price of capital if the price of labour is $6 per unit.The price of capital is

• A)$2.
• B)$10.
• C)$20.
• D)impossible to determine with the information given.

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Definitions:

Liability

A financial obligation or debt owed by a company to another entity, which must be settled in the future through the transfer of assets or services.

Petty Cash

Petty cash is a small amount of cash on hand used for paying expenses too small to merit writing a check or using a credit card.

Cash Payments

Transactions where money is paid out by a business or individual in exchange for goods or services.

Writing Checks

The process of completing a check to make a payment from a bank account.