A Firm Is Employing 100 Units of Labor and 50

question 109

Multiple Choice

A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital $5 per unit.For the quantities of inputs employed,MP_L = 2 and MP_K = 5.In this situation,the firm:

• A)is producing the maximum output possible given the prices and relative productivities of the inputs.
• B)could lower its production costs by using more labor and less capital.
• C)could increase its output at no extra cost by using more capital and less labor.
• D)should use more of both inputs in equal proportions.

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