Refer to Figure 8-6.At each of points A,C,E and G on the isoquant map we know that
A)the firm is at its cost-minimizing position for an output level of 4000 golf tees.
B)the firm can adjust its employment of factors to reduce its total cost,with output unchanged.
C)the firm has adjusted the factor prices to equate the ratio of marginal products of the factors.
D)the ratio of the marginal utilities of capital and labour is equal to the ratio of the prices of capital and labour.
E)the ratio of the marginal products of capital and labour is equal to the ratio of the prices of capital and labour.

Question

Quizplus · Accepted Answer

Points A, C, E, and G are all points where the isoquant is tangent to an isocost line. At these points, the firm has minimized its total cost for a given level of output. To achieve this, the firm must have adjusted the mix of capital and labor such that the ratio of the marginal product of capital to the marginal product of labor is equal to the ratio of the prices of capital and labor. Therefore, the correct choice is E.