Asked by Shreyans Nanavati on Jun 13, 2024
Verified
A firm produces 5 units of output from the last dollar it spends on labor and 10 units from the last dollar spent on capital. The firm should
A) employ more labor and less capital.
B) employ more capital and less labor.
C) employ more capital and labor.
D) employ less capital and labor.
Employ More Labor
The process of hiring additional personnel to increase the output or productivity of a business.
Employ More Capital
The process of investing additional funds or resources into a business to increase its capacity or efficiency.
- Analyze the cost-minimization strategy of a firm based on the marginal product and price of inputs.
Verified Answer
NI
Nayeli IbanezJun 19, 2024
Final Answer :
B
Explanation :
The firm should employ more capital and less labor because the marginal product of capital (10 units per dollar) is higher than the marginal product of labor (5 units per dollar), indicating that capital is currently a more efficient input.
Learning Objectives
- Analyze the cost-minimization strategy of a firm based on the marginal product and price of inputs.