Asked by
Mounika Pavuluri
on Nov 26, 2024
Verified
A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90. The price of labor is $20, and the price of capital is $30. If the business wants to minimize costs while keeping output constant, then it should
A) use more labor and less capital.
B) use less labor and less capital.
C) use less labor and more capital.
D) make no change in resource use.
Marginal Product
The extra production resulting from the increase of a particular input by one unit, while keeping all other inputs unchanged.
Price of Labor
The compensation or wage paid to employees for their work or labor, often determined by market forces or negotiations.
Price of Capital
The cost of borrowing money or the rental cost of physical capital, which influences investment decisions in business and economic analysis.
- Understand the principle of reducing costs for companies utilizing various inputs.
- Examine the impact of variations in input costs on the choices firms make about the combination of resources utilized in manufacturing.
Verified Answer
KJ
Learning Objectives
- Understand the principle of reducing costs for companies utilizing various inputs.
- Examine the impact of variations in input costs on the choices firms make about the combination of resources utilized in manufacturing.