Suppose a firm is employing labour (L) and capital (K) such that MPK/MPL = PK/PL. If the price of labour rises, the cost -minimizing firm should:
a) employ more capital and less labour because MPK/MPL < PK/PL.
b) do nothing.
c) employ more labour and less capital because MPK/MPL > PK/PL.
d) employ more capital and less labour because MPK/MPL > PK/PL.
e) employ more labour and less capital because MPK/MPL < PK/PL.
Ans: d) employ more capital and less labour because MPK/MPL > PK/PL.
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