FIGURE 8- 4
-Refer to Figure 8- 4. The firm is initially minimizing the cost of producing 1000 units of output. Suppose the factor prices then change such that the price of capital (K) falls and the price of labour
(L) rises. If the firm decides to leave its output unchanged, it will now move toward the point
A) A.
B) B.
C) C.
D) D.
E) unknown as there is insufficient information to know

Question

FIGURE 8- 4
-Refer to Figure 8- 4. The firm is initially minimizing the cost of producing 1000 units of output. Suppose the factor prices then change such that the price of capital (K) falls and the price of labour
(L) rises. If the firm decides to leave its output unchanged, it will now move toward the point
A) A. 
B) B. 
C) C. 
D) D. 
E) unknown as there is insufficient information to know

Quizplus · Accepted Answer

When the price of capital falls and the price of labor rises, the firm will substitute labor with capital to minimize costs, moving towards point A where more capital and less labor are used.

FIGURE 8- 4 -Refer to Figure 8- 4. the Firm Is Initially Minimizing