A perfectly competitive firm currently produces 100 units of output and hires its resources in a perfectly
Question:
A perfectly competitive firm currently produces 100 units of output and hires its resources in a perfectly competitive factor market. It uses both labor and capital as inputs. The price of labor is $40; the price of capital is $100. The marginal product of labor is 8 units, and the marginal product of capital is 10 units. Which of the following must be true?
A. The firm is currently maximizing it profit
B. The firm can produce more than 1000 units without increasing the total cost if it is used more labor and less capital
C. The firm can produce more than 1000 units without increasing the total cost if it is used more capital and less labor
D. The firm can reduce the cost of producing 1000 units by using less capital and employing the same amount of labor
E. The firm can reduce the cost of producing 1000 units by employing less labor and using the same amount of capital