Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 72, Problem 7MCQ
To determine
The correct option is when a firm produces its desired level of output and its marginal product of labor exceeds its marginal product of capital.
Expert Solution & Answer
Answer to Problem 7MCQ
From the available options, the correct option is firm should employ more labor and less capital.
Explanation of Solution
A firm should employ more labor and less capital because to attain or maximize the profit it needs to hire more labor that will increase the level of output and the capital will get fixed at a certain point. Whereas, if a firm hires less labor, then the output also declines and a firm cannot attain an increase in the desired level of output without hiring more labor. An increase in labor would also increase the marginal product of capital.
Therefore, the correct option is a.
Economics Concept Introduction
Introduction: Labor and capital are the factors of production that a firm used to produce a product in the market.
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.
Chapter 72 Solutions
Krugman's Economics For The Ap® Course
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