Suppose a firm is using labor and capital and obtaining the maximum possible out

Question

Suppose a firm is using labor and capital and obtaining the maximum possible output for a given total cost. If the price of labor increases, all other things unchanged, then the firm will:
A)
shift funds out of labor into capital.
B)
adjust factor utilization until the ratios of marginal product to price are equal for the two factors.
C)
hire less labor, which will result in an increase in labor's marginal product , and hire more capital, leading to a fall in the marginal product of capital.
D)
do all of the above.

Explanation / Answer

D) do all of the above.

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