You are an efficiency expert hired by a manufacturing firm that uses K and L as

Question

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given quantity of output. If w=$400, r=$100, MPL=4, and MPK=40:

A. the firm is minimizing the cost of producing the given quantity of output.
B. the firm should use less L and more K to minimize the cost of producing the given quantity of output.
C. the firm should use less K and more L to minimize the cost of producing the given quantity of output.
D. maximizing but not cost minimizing.

Explanation / Answer

B. the firm should use less L and more K to minimize the cost of producing the given quantity of output.

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