Questions Bank | Page 134673

A firm is using 50 units of labour and 100 units of capital to produce 2,000 units of output. The price of labour is $200 per unit and the price of capital is $100 per unit. At these input levels, another unit of labour adds 400 units to output and another unit of capital adds 600 units to output. The firm

both c and d

could produce 4 more units of output at the same cost by switching $1 from labour to capital.

could keep output constant and reduce cost by using more capital and less labour.

could produce 6 more units of output at the same cost by switching $1 from labour to capital.

is minimizing the cost of producing 2,000 units of output.

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