At the XYZ Co.,a unit of capital costs 3 times as much as a unit of labor.If the isoquants are convex,and the firm does not change its input mix in the long run,we can conclude that A) MP_K = 3 ∗ MP_L. B) the firm will not hire any capital. C) the firm will hire 3 times as much labor as capital. D) the firm will hire 3 times as much capital as labor.

Question

Quizplus · Accepted Answer

The correct answer is A because it reflects the condition where the marginal product of capital (MPS) adjusted for its cost is equal to three times the marginal product of labor (MPL) adjusted for its cost, which aligns with the given cost ratio of capital to labor. This is consistent with the firm's decision to maintain an optimal input mix in the long run, where the ratio of the marginal products adjusted for their respective costs matches the ratio of their costs.