If the MPP of labor is 60 and the price of labor per period is $20, the MPP of machinery is 75 and the price of the machinery per period is $25, in order to achieve optimal input proportions the firm should use
A) more labor and less machinery.
B) more machinery and less labor.
C) more labor with the same amount of machinery.
D) the current combination.

Question

Quizplus · Accepted Answer

The MPP of labor is 60 and the price of labor per period is $20, so the MPL is 60/$20 = 3. The MPP of machinery is 75 and the price of the machinery per period is $25, so the MPL is 75/$25 = 3. Since the MPLs are equal, the firm should use the current combination of inputs.

If the MPP of Labor Is 60 and the Price