Suppose a Firm Employs Two Kinds of Inputs,capital at $100

question 73

Multiple Choice

Suppose a firm employs two kinds of inputs,capital at $100 per unit,and labour at $25 per unit.If the marginal product of capital is 50,then the firm should ________ in order to minimize its production costs.

• A)employ more capital and less labour
• B)employ more labour and less capital
• C)employ more labour and more capital
• D)not change its current factor use
• E)There is insufficient information to make a recommendation.

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Definitions:

Marginal Product

The extra output produced by using an additional unit of a particular production factor, while holding other factors steady.

Candy Bars

Confectionery items that consist of chocolate and other sweet ingredients, often with a filling or coating.

VMPL

The value of the marginal product of labor, which denotes the additional value generated by employing one more worker.

Labor

The human effort, whether physical or mental, used in the production of goods and services.