When a firm uses inputs in a fixed proportion, the cost minimizing combination of capital and labor
A)occurs when the firm uses either all workers or all machines.
B)occurs when the firm uses equal amounts of workers and machines.
C)occurs where the ratio of the marginal productivities equals the ratio of the input prices.
D)occurs at the corner point on the isoquant.

Question

Quizplus · Accepted Answer

When a firm uses inputs in a fixed proportion, it implies a limited substitutability between inputs, leading to a situation where the cost-minimizing combination of capital and labor occurs at a corner point on the isoquant. This is because the firm cannot adjust the input mix for efficiency gains due to the fixed proportion requirement, thus often resulting in a situation where one input is fully utilized before the other is used.

When a Firm Uses Inputs in a Fixed Proportion, the Cost