A profit-maximizing firm will increase its use of capital and decrease its use of labour when the:
a) marginal product of capital is higher than the marginal product of labour.
b) marginal product of capital, per dollar spent on capital, is less than the marginal product of labour, per dollar spent on labour.
c) average product of capital is higher than the average product of labour.
d) total product of capital is higher than the total product of labour.
e) marginal product of capital, per dollar spent on capital, is greater than the marginal product of labour, per dollar spent on labour.
Ans: e) marginal product of capital, per dollar spent on capital, is greater than the marginal product of labour, per dollar spent on labour.
You might also like to view...
If a market produces a level of output that exceeds the competitive equilibrium output, then
A) social welfare will be higher. B) producer surplus will be higher. C) marginal cost will exceed price. D) All of the above.
Suppose Winston's annual salary as an accountant is $60,000, and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. To run the business, he outlays $8,000 in cash to cover all the costs involved with running the business, and earns revenues of $150,000. What are Winston's accounting profits?
A. $150,000 B. $138,000 C. $142,000 D. $78,000