Suppose that MP_L = 50 and MP_K = 30.If W = 25 and R = 10,then a firm A) Is producing its output at the lowest possible cost B) Could reduce costs by employing more labour and less capital C) Could reduce costs by employing more capital and less labour D) Could minimize costs by employing more of both inputs

Question

Quizplus · Accepted Answer

The firm's marginal product of capital (MPK) is 50/25 = 2, and its marginal product of labor (MPL) is 30/10 = 3. As MPL > MPK, the firm could reduce its costs by employing more capital and less labor. This would lead to a higher MPK and a lower MPL, resulting in a lower cost of production. Therefore, choice C is the best answer.

Suppose That MPL = 50 and MPK = 30

Suppose That MP_L = 50 and MP_K = 30