A firm is producing 1,000 units of output with 40 units of labor and 30 units of capital. The marginal product of the last units of labor and capital are, respectively, MP_L = 60 and MP_K = 120. The prices of labor and capital are, respectively, w = 30 and r = 40. To minimize the cost of producing 1,000 units of output the firm should increase____________ (labor, capital) and decrease ____________ (labor, capital) until _________ (w, r, L, K, MP_L, MP_L/w, MP_K, MP_K/r) equals _________ (w, r, L, K, MP_L, MP_L/w, MP_K, MP_K/r).

Question

Quizplus · Accepted Answer

The Answer of A firm is producing 1,000 units of output with 40 units of labor and 30 units of capital. The marginal product of the last units of labor and capital are, respectively, MP_L = 60 and MP_K = 120. The prices of labor and capital are, respectively, w = 30 and r = 40. To minimize the cost of producing 1,000 units of output the firm should increase____________ (labor, capital) and decrease ____________ (labor, capital) until _________ (w, r, L, K, MP_L, MP_L/w, MP_K, MP_K/r) equals _________ (w, r, L, K, MP_L, MP_L/w, MP_K, MP_K/r).

A Firm Is Producing 1,000 Units of Output with 40