If the cost of capital is $100 per hour, the wage paid to employees is $20 per hour, the marginal product of capital is 10 units per hour; and the marginal product of labor is 4 units per hour, to minimize its costs, the firm should increase the total amount of labor used and decrease the amount of capital used.

Question

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Given the information, the marginal cost of producing one unit using capital is $10 per unit ($100/10 units), and the marginal cost of producing one unit using labor is $5 per unit ($20/4 units). Since labor is cheaper per unit of output, to minimize costs, the firm should use more labor and less capital.

If the Cost of Capital Is $100 Per Hour, the Wage