When a cost- minimizing firm is faced with an increase in the relative price of labour, it adjusts its factor usage so as to
A) increase the marginal product of capital relative to the marginal product of labour.
B) use more of both capital and labour per unit of output.
C) increase the marginal product of labour relative to the marginal product of capital.
D) use more labour per unit of output than before.
E) maintain the previous usage of labour.

Question

Quizplus · Accepted Answer

The Answer of When a cost- minimizing firm is faced with an increase in the relative price of labour, it adjusts its factor usage so as to
A) increase the marginal product of capital relative to the marginal product of labour.
B) use more of both capital and labour per unit of output.
C) increase the marginal product of labour relative to the marginal product of capital.
D) use more labour per unit of output than before.
E) maintain the previous usage of labour.

When a Cost- Minimizing Firm Is Faced with an Increase