If a firm is choosing cost-minimizing combinations of inputs,marginal cost can be defined as the price of any:
A) input divided by its average product.
B) variable input divided by its average product.
C) fixed input divided by its average product.
D) variable input divided by its marginal product.
E) fixed input divided by its marginal product.

Question

Quizplus · Accepted Answer

Marginal cost can be defined as the additional cost incurred for producing one more unit of output. In a cost-minimizing situation, the firm is choosing the input combination where the marginal cost of each input is equal to its price. Therefore, marginal cost can be expressed as the price of the variable input divided by its marginal product. Option D correctly identifies this relationship between price and marginal product.

If a Firm Is Choosing Cost-Minimizing Combinations of Inputs,marginal Cost