If the cost of using skilled labor was twice the cost of using unskilled labor, and both were used by a profit-maximizing firm, the firm would adjust the quantity of each type of labor until
A) the marginal product of each was the same.
B) twice as much unskilled labor was used.
C) half as much unskilled labor was used.
D) the marginal product of skilled labor was twice that of unskilled labor.

Question

Quizplus · Accepted Answer

The firm will adjust labor usage so that the marginal product per dollar spent is equal for both types of labor. Since skilled labor costs twice as much, its marginal product must be twice that of unskilled labor to equalize the marginal product per dollar.

If the Cost of Using Skilled Labor Was Twice the Cost