If the cost of capital is $90 per hour, the wage paid to employees is $45 per hour, the marginal product of capital is 180 units per hour, and the marginal product of labor is 90 units per hour, to minimize its costs, the firm should _________ .

Question

Quizplus · Accepted Answer

To minimize costs, a firm should equate the ratio of the marginal product to the price for all inputs. Here, the marginal product per dollar for both labor and capital is 2 (90 units/$45 for labor and 180 units/$90 for capital), indicating that the firm is already minimizing costs by using the current amounts of labor and capital.

If the Cost of Capital Is $90 Per Hour, the Wage