A business is employing inputs such that the marginal product of labor is 40 and the marginal product of capital is 90.The price of labor is $20, and the price of capital is $30.If the business wants to minimize costs while keeping output constant, then it should
A)use more labor and less capital.
B)use less labor and less capital.
C)use less labor and more capital.
D)make no change in resource use.

Question

Quizplus · Accepted Answer

The marginal product of capital is higher than the marginal product of labor, but the price of labor is lower than the price of capital. Therefore, the business should use less labor and more capital to minimize costs while keeping output constant.

A Business Is Employing Inputs Such That the Marginal Product