Suppose That MP_L = 50 and MP_K = 30

question 57

Multiple Choice

Suppose that MP_L = 50 and MP_K = 30.If W = 25 and R = 10,then a firm

• A) Is producing its output at the lowest possible cost
• B) Could reduce costs by employing more labour and less capital
• C) Could reduce costs by employing more capital and less labour
• D) Could minimize costs by employing more of both inputs

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Definitions:

Interest Rate

The financial percentage of the principal demanded by a lender for giving a borrower access to resources.

Pure Discount Loan

A loan where the borrower receives a single lump sum payment at maturity instead of periodic payments, with interest incorporated in the repayment amount.

Present Value Problem

A calculation to determine the current value of a future amount of money or stream of cash flows given a specified rate of return.

Perpetuity

A financial instrument or investment that pays a fixed amount of cash flows indefinitely.