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Producer Is Hiring 20 Units of Labor and 6 Units

Question 1

Multiple Choice

producer is hiring 20 units of labor and 6 units of capital (bundle A) .The price of labor is $10,the price of capital is $2,and at A,the marginal products of labor and capital are both equal to 20.Beginning at A,if the producer increases expenditures on labor by $1 and decreases expenditures on capital by $1,then


A) cost remains constant and output decreases by 8 units.
B) cost remains constant and output increases by 12 units.
C) cost remains constant and output increases by 20 units.
D) output remains constant and cost increases by $8.
E) output remains constant and cost decreases by $2.

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