Multiple Choice
Suppose a firm is currently minimizing costs in the long run with marginal product of labor and marginal product of capital given by ½(K/L) 1/2 and ½(L/K) 1/2, respectively. If the price of capital falls by 50%, the capital-to-labor ratio will:
A) decrease by 50%.
B) double.
C) increase by 50%.
D) increase fivefold.
Correct Answer:
Verified
Correct Answer:
Verified
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