Under which of the following circumstances should a firm hire more labor and less capital?
a. The last unit of labor employed generated more output / total product than the last unit of capital employed.
b. The last dollar spent on labor generated more output / total product than the last dollar spent on capital.
c. Labor is relatively much cheaper than capital.
d. None of the above represents a condition where a firm should employ more labor and less capital.
Answer: b. The last dollar spent on labor generated more output / total product than the last dollar spent on capital.
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