Suppose the Marginal Rate of Technical Substitution for Labor with Capital

question 30

Multiple Choice

Suppose the marginal rate of technical substitution for labor with capital is 5,the marginal product of labor is 8,and the marginal product of capital is 4.Assuming the law of diminishing marginal product applies to both labor and capital,this firm:

• A) is minimizing the cost of producing its output.
• B) could reduce costs by using fewer workers and more capital.
• C) could reduce costs by using less capital and more workers.
• D) could reduce the cost of producing the output by reducing workers and capital by the same proportion.