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:

Geometric Sequence

A progression of numbers in which each term beyond the initial one is produced by the multiplication of the preceding term by a constant, non-zero multiplier called the common ratio.

Formula

A mathematical expression that describes a relationship among different quantities.

N Th Term

A formula that allows the calculation of any term in a sequence based on its position (n).

Salary

The amount of money paid to an employee at regular intervals for their services.