If MRP_C/P_C MRP_L/P_L , the firm could increase its profits by using:

Name: If MRP C /P C > MRP L /P L , the firm could increase its profits by using:
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Question

If MRP_C/P_C > MRP_L/P_L , the firm could increase its profits by using:

Quizplus · Accepted Answer

The given inequality suggests that the marginal rate of product substitution (MRPS) of labor (L) for capital (C) in the use case is greater than the MRPS of labor for capital in the less use case. This implies that substituting capital for labor is more productive, hence the firm could increase profits by using more capital (C) and less labor (L).

If MRPC/PC > MRPL/PL , the Firm Could Increase Its

If MRP_C/P_C > MRP_L/P_L , the Firm Could Increase Its