If a firm uses only capital and labor as inputs, then what should the firm do at a given rate of production if the marginal physical product of labor per last dollar spent is lower than the marginal physical product of capital per last dollar spent?
A) The firm should increase both the quantity of capital and the quantity of labor.
B) The firm should decrease both the quantity of capital and the quantity of labor.
C) The firm should increase the quantity of capital and reduce the quantity of labor.
D) The firm should decrease the quantity of capital and increase the quantity of labor.
Correct Answer:
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