Consider a Firm That Uses Only Labour and Capital as Inputs.At

question 9

Multiple Choice

Consider a firm that uses only labour and capital as inputs.At the present use of labour and capital,the MP of labour is four times the MP of capital,and the price of labour is twice the price of capital.In order to minimize its costs,the firm should

• A)substitute capital for labour until their marginal products are equal.
• B)decrease both capital and labour.
• C)decrease capital and increase labour.
• D)increase both labour and capital.
• E)stay at its present factor mix.

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Definitions:

Stated Value

The nominal value of a share of stock as determined by the issuing company, which may differ from its market value.

Common Stock

Shares entitling their holder to dividends that vary in amount and may even be missed, depending on the fortunes of the company.

Journal Entry

A record that captures the financial impact of a business transaction in the accounting system.

Stock Issuance

The process of making new shares available for sale by a company, often to raise capital.