Bev\'s Bakery, a donut maker, has discovered that the ratio of the marginal prod
ID: 1203549 • Letter: B
Question
Bev's Bakery, a donut maker, has discovered that the ratio of the marginal product of labor to the price of labor is 6.5, while the ratio of the marginal product of capital to the price of capital is 6.1. The firm has determined that it does not want to change its total costs. Bev's Bakery should:
do nothing different since there is insufficient information upon which to make a decision.
use more labor and less capital.
do nothing; the differences in the ratios of marginal product to input price are too small to matter.
use more capital and less labor.
a.do nothing different since there is insufficient information upon which to make a decision.
b.use more labor and less capital.
c.do nothing; the differences in the ratios of marginal product to input price are too small to matter.
d.use more capital and less labor.
Explanation / Answer
Bev's Bakery has determined that it does not want to change its total costs. Bev's Bakery should:
b. use more labor and less capital.
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