Suppose That a Firm Uses Only Capital, K, and Labor $M P _ { X } = 15$

question 23

Multiple Choice

Suppose that a firm uses only capital, K, and labor, L, in its production process. At the firm's current long-run combination of capital and labor, it uses positive amounts of both inputs and measures the marginal products as $M P _ { X } = 15$ and $M P _ { L } = 10$ . The rental rate of capital is r = 6 and the current wage rate for labor is w = 3. The firm

• A) is currently minimizing total cost in the long run.
• B) could lower cost by increasing the usage of capital and decreasing the usage of labor.
• C) could lower cost by increasing the usage of labor and decreasing the usage of capital.
• D) cannot lower cost without also lowering the level of output.

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