Answer the question on the basis of the following information: Suppose a firm hires both labor (L)and capital (C)under purely competitive conditions.The price of labor is P_L and that of capital is P_C.The marginal product of labor is MP_L and that of capital is MP_C.The firm sells its product competitively at a price of P_X. Refer to the given information.If MP_C/P_C MP_L/P_L,the firm: A) may be maximizing profits,but it is not minimizing costs. B) may be minimizing costs,but it is not maximizing profits. C) is neither minimizing costs nor maximizing profits. D) is minimizing costs and maximizing profits.

Question

Answer the question on the basis of the following information: Suppose a firm hires both labor (L)and capital (C)under purely competitive conditions.The price of labor is P_L and that of capital is P_C.The marginal product of labor is MP_L and that of capital is MP_C.The firm sells its product competitively at a price of P_X. Refer to the given information.If MP_C/P_C > MP_L/P_L,the firm: A) may be maximizing profits,but it is not minimizing costs. B) may be minimizing costs,but it is not maximizing profits. C) is neither minimizing costs nor maximizing profits. D) is minimizing costs and maximizing profits.

Quizplus · Accepted Answer

The firm is not using its resources efficiently because the marginal product per dollar spent on capital is greater than that for labor, indicating that reallocating resources could increase output or reduce costs.

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