FIGURE 8-4
-Refer to Figure 8-4.The firm is initially producing 2000 units and minimizing its production cost at point D.Suppose the prices of capital and labour each rise by 10%.If the firm wishes to continue producing the same level of output it will
A)move toward point A.
B)move toward point B.
C)move toward point C.
D)remain at point D.
E)move to the right of point D.

Question

FIGURE 8-4
-Refer to Figure 8-4.The firm is initially producing 2000 units and minimizing its production cost at point D.Suppose the prices of capital and labour each rise by 10%.If the firm wishes to continue producing the same level of output it will
A)move toward point A. 
B)move toward point B. 
C)move toward point C. 
D)remain at point D. 
E)move to the right of point D.

Quizplus · Accepted Answer

If the prices of both capital and labor rise by the same percentage, the firm's cost-minimizing combination of inputs remains unchanged, so it will remain at point D.

FIGURE 8-4 -Refer to Figure 8-4.The Firm Is Initially Producing 2000 Units