A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output. The firm
A) is using the cost-minimizing combination of capital and labor.
B) should use more of both inputs in equal proportions.
C) should use less of both inputs in equal proportions.
D) could produce the same level of output at a lower cost by using more capital and less labor.
E) could produce the same level of output at a lower cost by using less capital and more labor.

Question

Quizplus · Accepted Answer

The Answer of A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output. The firm
A) is using the cost-minimizing combination of capital and labor.
B) should use more of both inputs in equal proportions.
C) should use less of both inputs in equal proportions.
D) could produce the same level of output at a lower cost by using more capital and less labor.
E) could produce the same level of output at a lower cost by using less capital and more labor.

A Firm Is Using 500 Units of Capital and 200