A firm is employing capital and labor such that the marginal product of capital is 80 and the marginal product of labor is 20
If the price of a unit of capital is $30 and the price of a unit of labor is $15, is the firm minimizing its costs? If not, can you recommend a change for the firm to make in its relative amounts of labor and capital used? Explain.
No, the firm is not minimizing costs. The slope of its isoquant is -20/80 (-1/4) and the slope of its isocost line is -15/30 (-1/2). In order to minimize costs, the firm needs to produce where these slopes would be equal. In other words, the firm needs to produce where the slope of its isoquant is -1/2 . If the firm was to decrease its use of labor or increase its use of capital, the slope of the isoquant will rise.
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The majority of the members of the U.S. Congress want to retain the so-called Fairness Doctrine as a control over television and radio broadcasters because
A) competition by itself cannot produce fairness. B) government oversight is required to assure equal time for conflicting points of view. C) television and radio are local monopolies to a large extent. D) the air waves belong to the public. E) the doctrine gives more power and influence to members of Congress.
A firm's employment of labor outside the country in which the firm is located is called
A) featherbedding. B) a lockout. C) outsourcing. D) dumping.