If MP x MP y, a firm should hire more x and less y.

Name: If MP x > MP y, a firm should hire more x and less y.
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Question

If MP x > MP y, a firm should hire more x and less y.

Quizplus · Accepted Answer

The decision to hire more of input x or y depends not only on their marginal products (MP) but also on their marginal costs. A firm aims to equalize the marginal rate of substitution (MRS) between the inputs and their price ratio to achieve cost minimization or output maximization.

If MP X > MP Y, a Firm Should Hire