Chapter 72, Problem 4MCQ

To determine

What does the cost-minimization rule state when costs are minimized?

Answer to Problem 4MCQ

From the available options, the correct option is MP per dollar is equal for all factors.

Explanation of Solution

Marginal product is the extra benefit or output that a firm can earn by adding one additional unit of the input to the existing productive factors such as labor. And, according to the cost minimization rule, the Marginal Product per dollar is equal for all factors, where costs are minimized because according to this rule, firms ensure that the goods should be produced at least cost to maximize the profit. Therefore, the marginal product of each factor cannot be the same, MRP will not maximize, and MFC cannot be minimized.

Here, the correct option is a.

Economics Concept Introduction

Introduction: Cost minimization refers to the control of cost by which a firm maximizes its productivity by investing the lowest cost amount in inputs to produce a particular product.