If a Firm Is Using Labour and Capital Such That

question 28

Multiple Choice

If a firm is using labour and capital such that the MP of labour is two times the MP of capital,and the price of labour is four times the price of capital,the firm should ________ in order to minimize its costs of producing its output.

• A)increase capital and decrease labour
• B)decrease both capital and labour
• C)decrease capital and increase labour
• D)increase both labour and capital
• E)not alter its present factor mix

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Definitions:

Compounded Annually

Refers to the process of applying interest to both the initial principal and the accumulated interest over the past year.

RRSP

A Registered Retirement Savings Plan, a government-approved program in Canada that allows individuals to save for retirement on a tax-deferred basis.

Purchasing Power

The purchasing power of a currency represented through the quantity of goods or services a single unit can acquire.

Equal Monthly Contributions

Regular, identical payments made monthly towards a financial obligation or investment.