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.
Answer: C
You might also like to view...
Most employees ________ pay taxes on the value of health insurance provided by employers, and most people ________ get a tax break when buying individual health insurance policies
A) do; do B) do not; do not C) do not; do D) do; do not
If an economist is trying to figure out, in a certain situation, “What would happen if?”, then that economist is working in the area of
a. normative economics. b. positive economics. c. the theory of the firm. d. welfare economics.
When banks offer borrowers smaller loans than they have requested, banks are said to
A) shave credit. B) rediscount the loan. C) raze credit. D) ration credit.
Which of the following causes a leftward shift in the short-run aggregate supply curve? a. An increase of goods prices while nominal incomes are unchanged
b. An increase in nominal incomes (wages and salaries). c. An increase of full-employment real GDP. d. An increase of personal consumption expenditures while the price level is unchanged. e. An increase of personal consumption expenditures while full-employment real GDP is unchanged.