The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day.
TABLE 8-2
-Refer to Table 8-2.Suppose capital costs $6 per unit and labour costs $4 per unit and the firm is employing production method A.How should this firm adjust its use of capital and labour to minimize costs?
A)employ more capital and less labour
B)employ less capital and more labour
C)employ more capital and more labour
D)employ less capital and less labour
E)There is insufficient information to know.

Question

The following table shows the marginal products of capital (K)and labour (L)for various methods for Firm ABC to produce 1000 toys per day.
  TABLE 8-2
-Refer to Table 8-2.Suppose capital costs $6 per unit and labour costs $4 per unit and the firm is employing production method A.How should this firm adjust its use of capital and labour to minimize costs?
A)employ more capital and less labour 
B)employ less capital and more labour 
C)employ more capital and more labour 
D)employ less capital and less labour 
E)There is insufficient information to know.

Quizplus · Accepted Answer

The firm should employ more capital and less labour because capital is relatively cheaper than labour.

The Following Table Shows the Marginal Products of Capital (K)and