For a Given Firm, Whenever the Ratio of Marginal Product

question 24

Multiple Choice

For a given firm, whenever the ratio of marginal product to input price differs across inputs,

• A)the market will adjust the price of the higher priced input.
• B)it will always be possible to make a cost-saving substitution in favor of the input with the lower MP/P ratio (except in the case of corner solutions).
• C)it will always be possible to make a cost-saving substitution in favor of the input with the higher MP/P ratio.
• D)the market will adjust the price of the lower priced input.

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