By expressing the cost- minimizing condition as MPK/MPL = PK/PL,we are able to see
A)that the firm is producing at a lower cost if the left- hand side of the equation is greater than the right- hand side.
B)that the capital- labour ratio is fixed.
C)how the firm determines its profit- maximizing output.
D)that the ratio of factor prices is constant over time.
E)how the firm can adjust the marginal products of the factors of production to the prices of the factors given by the market.

Question

Quizplus · Accepted Answer

The expression MPK/MPL = PK/PL represents the condition for minimizing the cost of production for a firm. This condition indicates that the firm should allocate its resources such that the ratio of marginal product of capital to the marginal product of labor is equal to the ratio of the price of capital to the price of labor. This helps the firm to choose the most efficient combination of factors of production that will result in the lowest possible cost. Thus, option E is the best choice as it correctly identifies how the firm can adjust the marginal products of the factors of production to the prices of the factors given by the market.

By Expressing the Cost- Minimizing Condition as MPK/MPL = PK/PL,we