A firm employs 100 workers at a wage rate of €10 per hour, and 50 units of capital at a rate of €20 per hour. The firm is currently operating at a point on its isoquant curve. At this point, the marginal product of labour is 30, and the marginal product of capital is 50. Which of the following statements is correct? A. The firm is producing its current output level at the minimum cost. B. The firm could reduce the cost of producing its current output level by employing more capital and less labour. C. The firm could reduce the cost of producing its current output level by employing more labour and less capital. D. The firm could reduce the cost of producing its current output level by employing less capital and less labour. E. Both C and D are true.
A firm employs 100 workers at a wage rate of €10 per hour, and 50 units of capital at a rate of €20 per hour. The firm is currently operating at a point on its isoquant curve. At this point, the marginal product of labour is 30, and the marginal product of capital is 50. Which of the following statements is correct?
A. The firm is producing its current output level at the minimum cost.
B. The firm could reduce the cost of producing its current output level by employing more capital and less labour.
C. The firm could reduce the cost of producing its current output level by employing more labour and less capital.
D. The firm could reduce the cost of producing its current output level by employing less capital and less labour. E. Both C and D are true.
Step by step
Solved in 3 steps
