Multiple Choice
Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firm is employing labour and capital such that the marginal physical product of labour and capital is 20 and 5 and the prices paid to labour and capital are Rs. 60 and Rs. 40 respectively. How would you characterize the firm
A) the firm is in long-run equilibrium
B) the firm is earning excess profits
C) the firm should expand production
D) the firm should contract production
Correct Answer:
Verified
Correct Answer:
Verified
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