A Firm Is Employing Inputs Such That the Marginal Product

question 153

Multiple Choice

A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5, and the price of capital is $8. If the firm wants to minimize costs, then it should

• A) use more labor and less capital.
• B) use less labor and less capital.
• C) use less labor and more capital.
• D) make no change in resource use.

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Definitions:

Long-chain Alcohols

Alcohols containing a long chain of carbon atoms, typically more than twelve, used in detergents, emulsifiers, and solvents.

Fatty Acids

Long-chain hydrocarbon molecules with a carboxylic acid group, important as sources of energy and as components of cell membranes.

Sodium Palmitate

A sodium salt of palmitic acid, used in soap making and as a surfactant in cosmetics.

Tristearin

A triglyceride derived from stearic acid, commonly found in animal and vegetable fats, used in the production of soaps and cosmetics.