To choose: The option that correctly explains what a firm does to maximize the profit.

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Chapter 19, Problem 6MCQ

To determine

To choose:

The option that correctly explains what a firm does to maximize the profit.

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1. A firm's marginal product of labor is 20 and its marginal product of capital is 24. The wage rate is 5 and the rental rate of capital is 4. Is the firm minimizing its long-run cost of production? If yes, explain intuitively why this is the best choice. If not, explain why not and suggest how the firm should alter its production. For full credit, your answer must do more than state a rule; you must explain why the rule makes senSe.