A cost-minimising firm produces output (q) using capital (K) and labour (L) with the production technology q = F(K, L). At the current level of output, the marginal product of labour is 4 and the marginal product of capital is 5. The firm pays $10 per unit of labour and $8 per unit of capital. In order to minimise the cost of producing the current output level, the firm should (select all that apply): a) not change its input mix because the current input mix already minimises costs. b) increase K and reduce L. c) increase L and reduce K. d) reduce both K and L. e) increase both K and L. f) none of the above.

A cost-minimising firm produces output (q) using capital (K) and labour (L) with the production technology q = F(K, L). At the current level of output, the marginal product of labour is 4 and the marginal product of capital is 5. The firm pays $10 per unit of labour and $8 per unit of capital. In order to minimise the cost of producing the current output level, the firm should (select all that apply): a) not change its input mix because the current input mix already minimises costs. b) increase K and reduce L. c) increase L and reduce K. d) reduce both K and L. e) increase both K and L. f) none of the above.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 15P

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