Suppose a Firm Employs Two Inputs,X and Y,and That at Their

question 63

Multiple Choice

Suppose a firm employs two inputs,X and Y,and that at their current levels of use MP_X/P_X > MP_Y/P_Y.To minimize the cost of production,the firm should hire

• A)more input Y and less input X.
• B)more input X and less input Y.
• C)more input Y only if its price falls.
• D)more input X only if its price increases.
• E)more input X only if its price decreases.

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Definitions:

Selling Expenses

Costs incurred directly and indirectly in selling a product, including advertising, sales staff salaries, and commissions.

Administrative Expenses

Costs related to the general operation of a business that are not directly tied to producing goods or services.

Period Costs

Expenses that are incurred regardless of the level of production, such as sales and administrative costs, and are directly expensed on the income statement.

Direct Materials

refers to raw materials that are directly traceable to the manufacturing of a product and are an integral part of the finished product.