If the Marginal Product of Labor Is Four Times the Marginal

question 118

Multiple Choice

If the marginal product of labor is four times the marginal product of capital and the price of labor is twice the price of capital,then:

• A)labor will be substituted for capital by a profit maximizing firm.
• B)capital will be substituted for labor by a profit maximizing firm.
• C)output cannot be expanded any further by using the same input levels.
• D)input usage should be left unchanged.

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Definitions:

Product Differentiation

The process of distinguishing a product or service from others to make it more attractive to a particular target market.

Inelastic Demand

A situation in which the demand for a product or service is relatively unaffected by changes in price.

Car Repair Shop

An establishment where automobiles are repaired by auto mechanics, offering services from routine maintenance to more extensive repairs.

Intangibility

A characteristic of services that makes them unable to be seen, touched, or quantified before they are purchased and used.