Suppose That MP_L = 50 and MP_K = 30

question 38

Multiple Choice

Suppose that MP_L = 50 and MP_K = 30.If W = 25 and R = 10,then a firm:

• A) is producing its output at the lowest possible cost.
• B) could reduce costs by employing more labor and less capital.
• C) could reduce costs by employing more capital and less labor.
• D) could minimize costs by employing more of both inputs.

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Definitions:

Estimated Ending Inventory

A projection of the value of inventory on hand at the end of an accounting period, often calculated using inventory methods such as FIFO or LIFO.

Gross Profit Rate

The ratio of gross profit (sales minus cost of goods sold) to sales revenue, expressed as a percentage.

Balance Sheet

A financial statement that summarizes a company’s assets, liabilities, and shareholders’ equity at a specific point in time.

Gross Profit Method

An estimating technique used to determine the cost of goods sold and ending inventory, based on the gross profit margin.