A firm uses inputs A and B when the price of A is $3 per unit and the price of B is $5 per unit.The marginal product of A is 15 units.If the firm is making an optimal input decision,the marginal product of B must be
A) 1.
B) 9.
C) 15.
D) 25.
E) 45.

Question

Quizplus · Accepted Answer

To make an optimal input decision, a firm should equate the ratio of the marginal products of inputs to the ratio of their prices. Given the marginal product of A is 15 and its price is $3, for B with a price of $5, the marginal product of B should be such that (15/3) = (MP_B/5). Solving this equation gives MP_B = 25, making choice D correct.

A Firm Uses Inputs a and B When the Price