A Competitive Firm Uses Two Inputs: Capital and Labor

question 32

Multiple Choice

A competitive firm uses two inputs: capital and labor.At its current level of hiring of both inputs,capital's marginal product is 12 while labor's marginal product is 18.Capital's cost (C) is $8 per unit while labor's cost (W) is $9.In the long run,to produce the same output at a lower cost,the firm should

• A) hire more labor and less capital.
• B) hire less labor and less capital.
• C) hire more labor and more capital.
• D) hire less labor and more capital.