For a Firm with Only Two Inputs,capital and Labour,the Condition

question 7

Multiple Choice

For a firm with only two inputs,capital and labour,the condition MP_K/MP_L = P_K/P_L guarantees that the firm is

• A)at its profit-maximizing output but is not necessarily minimizing its costs.
• B)minimizing its costs but is not necessarily maximizing its profits.
• C)technically efficient but not economically efficient.
• D)economically efficient but not technically efficient.
• E)at its profit-maximizing and cost-minimizing level of output.

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Definitions:

Monetary Cost

The amount of money that must be paid or spent to acquire goods, services, or assets.

Implicit Cost

The opportunity costs that arise from using assets, resources, or funds in specific ways rather than the next best alternative.

Capital

The total value of assets owned by an individual or firm—physical assets plus financial assets.

Opportunity Cost

The cost of the next best alternative foregone as the result of making a decision.