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A firm finds that it currently has a marginal product of labor of 2 and a marginal product of capital of 4. The wage rate is $5, and the rental rate is $10. Both labor and capital have diminishing marginal returns. Which of the following statements is true? Select one: Cannot be determined given the information. b. They have minimized their costs producing that level of output. c. They could produce the same amount of output at a lower total cost by using more capital and less labor. d. They could produce the same amount of output at a lower total cost by using more labor and less capital.

A firm finds that it currently has a marginal product of labor of 2 and a marginal product of capital of 4. The wage rate is $5, and the rental rate is $10. Both labor and capital have diminishing marginal returns. Which of the following statements is true? Select one: Cannot be determined given the information. b. They have minimized their costs producing that level of output. c. They could produce the same amount of output at a lower total cost by using more capital and less labor. d. They could produce the same amount of output at a lower total cost by using more labor and less capital.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Lesson 8 - Costs

Question 9

A firm finds that it currently has a marginal product of labor of 2 and a marginal product of capital of 4. The wage rate is $5, and the rental rate is $10. Both labor and capital have diminishing marginal returns. Which of the following statements is true? Select one: Cannot be determined given the information. b. They have minimized their costs producing that level of output. c. They could produce the same amount of output at a lower total cost by using more capital and less labor. d. They could produce the same amount of output at a lower total cost by using more labor and less capital.
Transcribed Image Text:A firm finds that it currently has a marginal product of labor of 2 and a marginal product of capital of 4. The wage rate is $5, and the rental rate is $10. Both labor and capital have diminishing marginal returns. Which of the following statements is true? Select one: Cannot be determined given the information. b. They have minimized their costs producing that level of output. c. They could produce the same amount of output at a lower total cost by using more capital and less labor. d. They could produce the same amount of output at a lower total cost by using more labor and less capital.
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