A firm is employing 100 units of labour and 50 units of capital to 200 units of a good. Labour costs Rs. 10 per unit and capital Rs. 5 per unit. For the quantities of inputs employed and . In this situation the firm
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A firm is employing 100 units of labour and 50 units of capital to 200 units of a good. Labour costs Rs. 10 per unit and capital Rs. 5 per unit. For the quantities of inputs employed MP_L = 2 and MP_K = 5. In this situation the firm (A) Producing the profit maximising output possible given process and relative productivities of the inputs (B) Could lower its production costs by using more labour and less capital (C) Could increase its output at no extra costs by using more capital and less labour (D) Should use more of both inputs in equal opportunities
Production and returns to scale has come up 92 times in 6 exams since 2007.
This question is on Producer equilibrium and the expansion path, part of Production and returns to scale in Microeconomics.
The least-cost mix of inputs at given prices and how it moves as output grows.
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Question from the UoH 2016 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.