If a Firm Uses Only Capital and Labor as Inputs

question 227

Multiple Choice

If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is higher than the marginal physical product of capital per last dollar spent?

• A) The firm should increase both the quantity of capital and the quantity of labor.
• B) The firm should decrease both the quantity of capital and the quantity of labor.
• C) The firm should increase the quantity of capital and reduce the quantity of labor.
• D) The firm should decrease the quantity of capital and increase the quantity of labor.

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