If the cost of capital is $32 per hour, the wage paid to employees is $15 per hour, the marginal product of capital is 16 units per hour, and the marginal product of labor is 6 units per hour, to minimize its costs, the firm should ________ .

Question

Quizplus · Accepted Answer

To minimize costs, the firm should use more of the input that has a higher marginal product (in this case, capital) and less of the input that has a lower marginal product (labor). This means decreasing the amount of labor used and increasing the amount of capital used. This will result in a higher output with fewer input costs.

If the Cost of Capital Is $32 Per Hour, the Wage