If the cost of capital is $80 per hour, the wage paid to employees is $15 per hour, the marginal product of capital is 24 units per hour; and the marginal product of labor is 3 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

Quizplus · Accepted Answer

To minimize costs, the firm should increase the ratio of capital to labor, as the marginal product of capital is higher than the marginal product of labor. This means using more capital and less labor.

If the Cost of Capital Is $80 Per Hour, the Wage