Suppose capital and labor are perfect substitutes in a long-run production process. If labor costs $15 per hour and the rental rate of capital is $20 per hour, what can we say about the profit maximizing choice of labor and capital inputs?
A) We will only use labor in the production process
B) We will only use capital in the production process
C) We will use equal amounts of capital and labor
D) The optimal capital-labor ratio is 0.75-to-1.
A
Economics