Suppose That Capital and Labor Are Perfect Complements in a One-To-One

question 33

Multiple Choice

Suppose that capital and labor are perfect complements in a one-to-one ratio in a firm's production function. The firm is currently at an efficient production level, employing an equal number of machines and workers. Suppose the cost of labor were to double and the cost of capital were to fall by half. If the firm wanted to produce the previous level of output, the firm would hire:

• A)more labor and less capital.
• B)less labor and more capital.
• C)the same amounts of labor and capital.
• D)twice as much labor as capital.

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