Suppose a Firm Hires Both Labor (L) and Capital (C)

question 105

Multiple Choice

Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is P_L, and that of capital is P_C. The marginal product of labor is MP_L, and that of capital is MP_C. The firm sells its product competitively at a price of P_X. If MP_C / P_C > MP_L / P_L, the firm

• A) may be maximizing profits, but it is not minimizing costs.
• B) may be minimizing costs, but it is not maximizing profits.
• C) is neither minimizing costs nor maximizing profits.
• D) is minimizing costs and maximizing profits.

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Definitions:

Behavior Patterns

Recurrent ways of acting or responding that are characteristic to an individual or group.

Interpersonal Processes

Involves the ways in which individuals interact, communicate, and relate to each other within various social contexts.

Humanistic Approach

A psychological perspective focusing on individual potential, self-actualization, and viewing people as inherently good.

Personal Responsibility

The acceptance of being accountable for one's actions, decisions, and their consequences.