If MPPa/Pa MPPb/Pb, then the proportions of these two inputs is optimal.

Question

If MPPa/Pa > MPPb/Pb, then the proportions of these two inputs is optimal.

Quizplus · Accepted Answer

The statement that MPPa/Pa > MPPb/Pb indicates that the marginal product per unit cost of input a is greater than that of input b, but it does not necessarily mean the proportions of these two inputs are optimal. Optimal input proportions are achieved when the ratio of the marginal products equals the ratio of their prices (MPPa/Pa = MPPb/Pb), according to the principle of cost minimization or profit maximization in production theory.

If MPPa/Pa > MPPb/Pb, Then the Proportions of These Two