Question

Suppose the firm currently uses the input (L; K) = (8; 10) and produces 10 units of output. In addition, the manager finds that MPL MPK < w r : What can the manager do to reduce cost but still maintain the same output? (Assume L; K can be continuously adjusted. So you can hire part-timers or temporary rent capital goods). A. Layoff some workers and acquire more capitals. B. Hire more worker and sell some capitals. C. The firm is already doing its best by hiring more capital than labor. D. None of the above

Answer 1

A. Layoff some workers and acquire more capitals.

Step-by-step explanation:

See attached file