Which of the Following Identifies the Optimal Usage of Inputs

question 29

Multiple Choice

Which of the following identifies the optimal usage of inputs by a profit-maximizing firm?

• A) Marginal product of labor = marginal product of capital = 0
• B) Marginal product of labor/price of labor = marginal product of capital/price of capital
• C) Marginal revenue product of labor = marginal revenue product of capital
• D) Marginal cost of labor = marginal cost of capital
• E) Marginal product of labor/marginal product of capital = price of capital/price of labor

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Definitions:

Indirect Materials

Materials used in the production process that cannot be directly linked to specific products or jobs, such as lubricants and cleaning supplies for machinery.

Production

The act of developing, expanding, producing, or enhancing products and services.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a certain activity base.

Direct Materials

Raw materials that are traceable directly to the finished product in the manufacturing process.