A cost-minimizing firm will increase its use of labour and decrease its use of capital when the
A)marginal product of capital is higher than the marginal product of labour.
B)marginal product of capital,per dollar spent on capital,is greater than the marginal product of labour,per dollar spent on labour.
C)average product of capital is higher than the average product of labour.
D)total product of capital is higher than the total product of labour.
E)marginal product of capital,per dollar spent on capital,is less than the marginal product of labour,per dollar spent on labour.

Question

Quizplus · Accepted Answer

A cost-minimizing firm will adjust its input usage based on the marginal product per dollar spent. If the marginal product of labor per dollar is greater than that of capital, the firm will use more labor and less capital to minimize costs.

A Cost-Minimizing Firm Will Increase Its Use of Labour and Decrease