29. Consider a firm minimising the cost of production, given factor prices. For this firm, the following is observed: MPL MPK w where w is the wage rate, r is the rental rate of capital, MPı is the marginal product of labour and MPx is the marginal product of capital. To minimise the cost of production, what should this firm do? a) Pay higher wages. c) Use more labour and less capital. b) Pay lower rental rate of capital. d) Use less labour and more capital.

29. Consider a firm minimising the cost of production, given factor prices. For this firm, the following is observed: MPL MPK w where w is the wage rate, r is the rental rate of capital, MPı is the marginal product of labour and MPx is the marginal product of capital. To minimise the cost of production, what should this firm do? a) Pay higher wages. c) Use more labour and less capital. b) Pay lower rental rate of capital. d) Use less labour and more capital.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A5
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