If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor,then in order to minimize costs the firm should use:
A) less capital and more labor.
B) less labor and more capital.
C) less labor and less capital.
D) more labor and more capital.

Question

Quizplus · Accepted Answer

To minimize costs, a firm should allocate its spending towards the input with the higher marginal product per dollar. If the marginal product per dollar spent on labor is higher than that spent on capital, the firm should use less capital and more labor to minimize costs.

If the Marginal Product Per Dollar Spent on Capital Is