If a firm fired one worker and lost 12 units of production and decides to add one more unit of capital,then to remain on the same isoquant what must be true?

Question

Quizplus · Accepted Answer

To remain on the same isoquant after firing one worker and losing 12 units of production, the firm needs to add one more unit of capital. For this, the marginal product of capital (MPₖ) should be equal to the output lost by firing one worker, which is 12 units. Therefore, choice A is correct. Choice B is incorrect as there's no mention of forcing other workers to work more in the scenario. Choice C is also incorrect as the scenario does not imply a decline in output, but rather a loss of output due to firing a worker. Choice D is incorrect as there's no information given about the marginal rate of technical substitution.

If a Firm Fired One Worker and Lost 12 Units