A firm is currently using two inputs: labor and capital.It rents equipment for $1,000,which produces a value of the marginal product of $5,000.It hires workers at $10 per hour,who produce a value of the marginal product of $100.The wages of workers rise by 20 percent and the rental price of capital increases by 25 percent.The firm should hire ________ labor and ________ capital.
A) more; more
B) more; less
C) the same amount of; the same amount of
D) less; more
E) less; less

Question

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The Answer of A firm is currently using two inputs: labor and capital.It rents equipment for $1,000,which produces a value of the marginal product of $5,000.It hires workers at $10 per hour,who produce a value of the marginal product of $100.The wages of workers rise by 20 percent and the rental price of capital increases by 25 percent.The firm should hire ________ labor and ________ capital.
A) more; more
B) more; less
C) the same amount of; the same amount of
D) less; more
E) less; less

A Firm Is Currently Using Two Inputs: Labor and Capital