Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL. If the price of labour rises, the cost- minimizing firm should A) do nothing. B) employ more capital and less labour because MPK/MPL PK/PL

Question

Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL. If the price of labour rises, the cost- minimizing firm should A) do nothing. B) employ more capital and less labour because MPK/MPL < PK/PL. C) employ more labour and less capital because MPK/MPL < PK/PL D) employ more labour and less capital because MPK/MPL > PK/PL. E) employ more capital and less labour because MPK/MPL > PK/PL

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The Answer of Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL. If the price of labour rises, the cost- minimizing firm should A) do nothing. B) employ more capital and less labour because MPK/MPL < PK/PL. C) employ more labour and less capital because MPK/MPL < PK/PL D) employ more labour and less capital because MPK/MPL > PK/PL. E) employ more capital and less labour because MPK/MPL > PK/PL

Suppose a Firm Is Employing Labour (L) and Capital (K)