Suppose that capital and labour are perfect complements in a one-to-one ratio in a firm's production function. The firm is currently at an efficient production level, employing an equal number of machines and workers. Suppose the cost of labour were to double and the cost of capital were to fall by half. If the firm wanted to produce the previous level of output, the firm would hire (1) the same amounts of labour and capital. (2) twice as much labour as capital. (3) more labour and less capital. (4) less labour and more capital. Suppose in a particular production process that capital and labour are perfect substitutes so that three units of labour are equivalent to one unit of capital. If the price of capital is $4 per unit and the price of labour is $1 per unit, the firm should. (1) employ labour only. (2) employ capital only. (3) use three times as much capital as labour. (4) use three times as much labour as capital.
Suppose that capital and labour are perfect complements in a one-to-one ratio in a firm's production function. The firm is currently at an efficient production level, employing an equal number of machines and workers. Suppose the cost of labour were to double and the cost of capital were to fall by half. If the firm wanted to produce the previous level of output, the firm would hire (1) the same amounts of labour and capital. (2) twice as much labour as capital. (3) more labour and less capital. (4) less labour and more capital. Suppose in a particular production process that capital and labour are perfect substitutes so that three units of labour are equivalent to one unit of capital. If the price of capital is $4 per unit and the price of labour is $1 per unit, the firm should. (1) employ labour only. (2) employ capital only. (3) use three times as much capital as labour. (4) use three times as much labour as capital.
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.2P
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