Suppose a firm is producing some output level q1 using a combination of capital and labor for which the RTS (MPL/MPK) at this input combination is 1. Suppose further that the wage rate is $20 and the rental rate on capital is $10. Which of the following statements is correct?
Suppose a firm is producing some output level q1 using a combination of capital and labor for which the RTS (MPL/MPK) at this input combination is 1. Suppose further that the wage rate is $20 and the rental rate on capital is $10. Which of the following statements is correct?
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 19PAE
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Question
Suppose a firm is producing some output level q1 using a combination of capital and labor for which the RTS (MPL/MPK) at this input combination is 1. Suppose further that the wage rate is $20 and the rental rate on capital is $10. Which of the following statements is correct?
A.
The firm can reduce its costs of producing q1 by using more labor and less capital
B.
The firm can reduce its costs of producing q1 by using more capital and less labor
C.
The firm is currently minimizing the costs of producing q1
D.
Whether or not the firm is minimizing the costs of producing q1 is indeterminate
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