Question
A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital costs $5
A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital costs $5 per unit.For the quantities of the inputs employed, MPL = 2 and MPK = 5.In this situation, the firm
Select one:
a.should use more of both inputs in equal proportions.
b.could lower its production costs by using more labor and less capital.
c.should use less of both inputs in equal proportions.
d.could increase its output at no extra cost by using more capital and less labor.
e.is producing the maximum output possible given the prices and relative productivities of the inputs.
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