If skilled labor is three times the cost of unskilled labor, a profit-maximizing firm will vary the quantity of each type of labor until the
A) marginal product of each is the same.
B) amount of unskilled labor used is three times the quantity of skilled labor used.
C) amount of unskilled labor used is one-third the quantity of skilled labor used.
D) marginal product of unskilled labor is one-third that of skilled labor.

Question

Quizplus · Accepted Answer

A profit-maximizing firm will hire labor until the marginal product per dollar spent on each type of labor is equal. Since skilled labor is three times the cost of unskilled labor, the marginal product of unskilled labor should be one-third that of skilled labor.

If Skilled Labor Is Three Times the Cost of Unskilled