A firm in a competitive marketplace employs 10 workers at a wage rate of $20 per hour, and 10 units of capital at a rate of $25 per hour. The marginal product of labor is 4, and the marginal product of capital is 5. The firm O could substitute capital for labor to minimize costs of its current output. O could substitute capital for labor to increase output at its current cost. O is currently using the optimal amount of inputs. O could increase its output at no extra cost by employing more labor and less capital. O Both (a) and (b) are true.
A firm in a competitive marketplace employs 10 workers at a wage rate of $20 per hour, and 10 units of capital at a rate of $25 per hour. The marginal product of labor is 4, and the marginal product of capital is 5. The firm O could substitute capital for labor to minimize costs of its current output. O could substitute capital for labor to increase output at its current cost. O is currently using the optimal amount of inputs. O could increase its output at no extra cost by employing more labor and less capital. O Both (a) and (b) are true.
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 3.8P
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