Suppose That a Firm Uses Only Capital,K,and Labor,L,in Its Production

question 56

Multiple Choice

Suppose that a firm uses only capital,K,and labor,L,in its production process.At the firm's current long-run combination of capital and labor,it uses positive amounts of both inputs and measures the marginal products as and .The rental rate of capital is r = 6 and the current wage rate for labor is w = 3.The firm

• A) is currently minimizing total cost in the long run.
• B) could lower cost by increasing the usage of capital and decreasing the usage of labor.
• C) could lower cost by increasing the usage of labor and decreasing the usage of capital.
• D) cannot lower cost without also lowering the level of output.

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Definitions:

Field

A characteristic of interest that describes an entity.

Primary Key

A field (or attribute) of a record that uniquely identifies that record so that it can be retrieved, updated, and sorted.

Identifier Field

In databases, a specific column or attribute used to uniquely determine a record or row in a table, serving as a primary key or unique identifier.

Foreign Key

A column or set of columns in a relational database table that provides a link between data in two tables, used to maintain the integrity of the data by ensuring that relationships between tables remain consistent.