FIGURE 8- 4
-Refer to Figure 8- 4. The firm is initially producing 1000 units and minimizing its production cost at point B. Suppose the prices of capital and labour each fall by 20 percent. If the firm wishes to continue producing the same level of output it will
A) move toward point D.
B) move toward point A.
C) move toward point C.
D) remain at point B.
E) move to the left of point B.

Question

FIGURE 8- 4
-Refer to Figure 8- 4. The firm is initially producing 1000 units and minimizing its production cost at point B. Suppose the prices of capital and labour each fall by 20 percent. If the firm wishes to continue producing the same level of output it will
A) move toward point D. 
B) move toward point A. 
C) move toward point C. 
D) remain at point B. 
E) move to the left of point B.

Quizplus · Accepted Answer

When the prices of both capital and labor fall by the same percentage, the firm's cost-minimizing combination of inputs does not change, so it will remain at point B while continuing to produce the same level of output.

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