Which of the following presents an optimal combination of inputs?
A) marginal product of labor/marginal product of capital = price of labor/price of capital
B) marginal product of labor/price of capital = marginal product of capital/price of labor
C) marginal product of capital/price of labor = price of labor/marginal product of labor
D) marginal product of capital/marginal product of labor = price of labor/price of capital
E) marginal product of capital = marginal product of labor

Question

Quizplus · Accepted Answer

The optimal combination of inputs, according to the principle of cost minimization or profit maximization in economics, occurs when the ratio of the marginal product of labor to the marginal product of capital equals the ratio of the price of labor to the price of capital. This ensures that the last dollar spent on each input yields the same marginal benefit, leading to an efficient allocation of resources.

Which of the Following Presents an Optimal Combination of Inputs