A cost-minimizing firm using two inputs, x and y, will employ inputs so that
A)MPx = MPy.
B)Px / MPy = Py / MPx.
C)MPx / Px = MPy / Py.
D)Px = Py.

Question

Quizplus · Accepted Answer

A cost-minimizing firm will employ inputs such that the marginal product per dollar spent on each input is equal, i.e., MPx / Px = MPy / Py. This ensures that the firm is getting the same additional output per unit of cost from each input.

A Cost-Minimizing Firm Using Two Inputs, X and Y, Will