Suppose a firm is using 100 units of labour and 50 units of capital to produce 200 completed client tax returns per day.The price of labour is $5 per unit and the price of capital is $2 per unit.The MPL equals 5 and the MPK equals 2.In this situation,the firm
A) is minimizing its costs.
B) should increase the use of both inputs.
C) could lower its production costs by decreasing labour input and increasing capital input.
D) could lower its production costs by increasing labour input and decreasing capital input.
E) should decrease the use of both inputs.
Correct Answer:
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Q1: Suppose a firm is using 1500 units
Q2: By expressing the cost-minimizing condition as MPK/MPL
Q4: A cost-minimizing firm will increase its use
Q5: Suppose a firm is using 1500 units
Q6: TABLE 8-1 Q7: Consider a firm that uses only labour Q8: The principle of substitution plays a central Q9: Which of the following conditions indicate cost Q10: A profit-maximizing firm will increase its use Q11: TABLE 8-1
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